Why Invest in Forest and Land

Forestry as a Long-Term Investment

Forestry has historically offered robust and attractive risk-adjusted returns, driven by biological growth. As an asset class, it also provides a natural hedge against inflation and enhances portfolio diversification due to its low correlation with stock markets.

The demand for wood is steadily rising, fueled by a global shift toward reducing carbon footprints. Wood is increasingly being used as a sustainable substitute for concrete, steel, and plastic – materials with higher environmental impacts.

A significant portion of the value generated from forestry investments stems from the biological growth of the trees. Each year, this growth contributes to an increase in both the volume and diameter of individual trees, steadily increasing the value of the forest stand.

When entering a partnership with Cresco Capital Services, we conduct thorough evaluations and financial projections based on growth models and current market insights, particularly regarding timber prices.

Investment in the forestry asset class

fundamental drivers and strengths

macrotrends

  • Construction sector's green shift: wood replacing carbon-heavy materials.
  • Global demand for wood-based products and fibers to replace plastics and in textiles.
  • Increasing demand for carbon removals and offsetting.

Asset class strengths

  • Biological growth drives returns and forest stock, supporting capital and carbon gains.
  • Low correlation to stock markets.
  • Stable and resilient returns based on increasing demand.
  • Flexibility of market timing, harvest timing, and exit.
  • Diversification of locations, age classes, tree species supports stable cash-flows and reduces risks.
  • The asset class acts as a risk-diversifying element in portfolios with other asset classes.
  • The asset class has historically performed well in periods of crisis or high inflation.
  • Positive correlation between inflation and timber prices.
  • The asset class is less sensitive to high-interest environments under inflationary conditions due to strong and long-term investors.
  • Forests in Northern Europe perform well on environmental, social, and governance measures.
  • Good opportunities for certification and compliance with sustainability standards.
  • Potential upside from payments for ecosystem services (carbon offsets and biodiversity).