With a continued and growing awareness by businesses, investors, and consumers concerned with their environmental and societal impacts, we are seeing investors increasingly incorporating Environmental, Social, and Governance principles (ESG) into their investments. These concepts are nothing new to timberland investments where “green” and “sustainability” have long been associated concepts in timberland investing. In today’s landscape, conservation, carbon banking, and environmentally sound stewardship is underwritten by third-party certification and other oversight mechanisms.
Available ESG Properties
Lewis County, NY | 30,171± Acres | $8,750,000
Thetford, VT | 500± Acres | $475,000
Moxie Gore, ME | 3,183± Acres | $1,355,000
Northeastern Kentucky | 34,151± Acres | $19,200,000
Lowell, VT | 610± Acres | $1,250,000
Moretown, VT | 652± Acres | $575,000
Investments in forestland are not necessarily everyday/mainstream for most investors; however, it is a well-established industry with investors of all stripes and offers some unique and desirable investment characteristics. Timberland represents a real/hard asset capable of return from biological growth, cash flow operating activities, and product and price appreciation in their most basic form. Many investors, applying portfolio theory, allocate 3-10% of their portfolio value to real assets including timberland. Timberland investments offer a low correlation to equities and many other asset classes, tend to be long-term and low risk, are often used as a hedge against inflation, and, in some situations, are a vehicle to preserve wealth.
Investments in timberland are inherently an attractive ESG investment when managed ethically and sustainably, which the vast majority of investment-grade timberland is and which any investment in land can be. Timberland and timber management often involve layers of these principals beginning at the ground level with concern for soil productivity and water quality at the forefront of the management decisions. Conservation ideals carbon sequestration, and mitigation banking opportunities provide more formal stewardship opportunities. Third-party oversight and chain of custody “certification” is available to interested investors.
Conservation easements are a common overlay to timberland properties. “Working Forest Conservation Easements” (WFCE), as they are often termed, are most prevalent across Northeastern and Midwestern timberland regions; however, examples can be found throughout the country. Although most WFCEs are custom tailored to each property, they share similar terms and principles depending on the situation. The purpose of these instruments is primarily to conserve open space, protect sensitive sites and species, limit future fragmentation and development, promote public access and outdoor recreation, and to encourage or mandate a productive working forest into perpetuity. WFCEs often include a comprehensive forest management plan or third-party sustainability certification requirement ensuring long-term professional quality timber and forest management. Whether by implementing a new conservation easement or by virtue of stewarding an existing easement for a period of time, each provide for very real ESG intangibles.
Carbon sequestration is a more recent value and benefit associated with timberland properties. Sequestering carbon is done to mitigate/offset carbon emissions elsewhere to maintain climate health. Supported by both compliance and voluntary markets, certain timberland properties provide desirable conditions for this type of activity. Ownerships capable of additive carbon sequestration and those developed for this purpose, offer investment flexibility by creating a parallel cash flow option to sale of forest products depending on the current market forces. Stewarding assets of this nature is a clear example of ESG investing.
Forest certification offers landowners a voluntary check and balance, third-party verification system oversight of management practices and chain of custody. Certification offers accountability and compliance with ESG principles, maintains chain of custody continuity and can also contribute to favorable forest product pricing and marketability. Sustainable Forest Initiative (SFI) and Forest Stewardship Council (FSC) are the two primary oversight bodies for timberland owners.
For more information about ESG and investing in timberland properties, please contact David Speirs (firstname.lastname@example.org) at (207) 233-4950 or any of one of our many land brokers at LandVest.
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