Title: Forestry as a sustainable asset class for turbulent times?

Authors: Christian Rockemann, Dirk Schiereck

Addresses: First Forest GmbH, Elisabethstrasse 25, D-80796 Munchen, Germany. ' Technische Universitat Darmstadt, Fachbereich Rechts- und Wirtschaftswissenschaften, Institut fur Betriebswirtschaftslehre, Hochschulstr 1, D-64289 Darmstadt, Germany

Abstract: There is good reason to anticipate increased demand for sustainable and responsible investments from both retail and large institutional investors. Increasing interest in forestry may come from both a financial and general sustainability standpoint, and from a carbon perspective, because trees are a critical part of any successful climate change strategy. We develop the true sustainable financial return (TSFR) concept for forestry investment screening which provides a good indication of long-run, sustainable return levels without leverage. Depending on investment horizon and illiquidity level, forestry investments tied to biological growth drivers seem the most attractive. Forestry then qualifies as a sustainable and responsible investment even during periods of financial crisis. In addition, we provide evidence that forestry investments can offer significant value to investors by adding a low correlation with other assets. Ultimately, the business model is proven and successful.

Keywords: natural resources; sustainability; forestry; timber investments; asset management; alternative investments; quantitative analytics; risk management; carbon sink; sustainable development; sustainable financial returns.

DOI: 10.1504/IER.2010.037906

Interdisciplinary Environmental Review, 2010 Vol.11 No.2/3, pp.191 - 210

Published online: 05 Jan 2011 *

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