Savour International

Forests are more popular than ever, as green lungs of our cities, as recreational areas, and increasingly as a target for "green" investments. Do profits on forests shoot skyward like trees do? Environmental discussions in recent years have placed forests, one of man's oldest economic goods, back in the limelight. The environment is no longer a peripheral subject confined to green gurus. Politicians and economists are now also exploring sustainability issues. As a result, forests have become the center of attention again.

Green money

Agrowing number of investors are discovering wood as an alternative investment. Forests have long had a part to play as an investment good. Forest property has been the basis of security and prosperity for many noble families and public entities in Europe since time immemorial. Forests are reliable sources of construction and heating material. With the rise of coal, steel, oil and concrete, wood became steadily less significant in the 20th century as a building material and as a source of energy.

But that situation has changed in recent years. Wood now boasts the third largest commodity market in the world after oil and gas. Global demand for this resource has been growing robustly for years. That growth is attributable to the versatility of this material. Wood has become a significant economic factor for many sectors, from the building trades to businesses that finish the luxury interiors of buildings or yachts.

By 2020, the output of pulp produced from wood for paper production will increase by 36%; by 2015, the demand for industrial wood will grow by 10%. Prices for certain types of precious wood have increased ten-fold since the 1980s. Thanks to the rapid growth of the Chinese market, wood is also a hot commodity there and forestland accounts for just 10% of the total land cover in that country. Experts predict that Chinese lumber imports will become as significant as crude oil in the future.

Healthy growth market

The market is currently valued at over US$ 300 billion. Worldwide wood consumption rose from 1960 through 1995 by 60% to over 3.3 billion cubic meters. In 2002, global demand reached 4.4 billion. The FAO (Food and Agriculture Organization of the UN) predicts that the worldwide consumption of wood will climb to 5.3 billion by 2010, representing an increase in demand for wood of 60% in a mere 15 years.

The worldwide demand for wood correlates directly with the growth of the global economy and the global population. The fastest pace of growth in wood consumption is in Asia, a region with 60% of the world's population but just 14% of the world's forests.

Definite trend toward investing in wood

People have been talking again about wood as an alternative investment since the mid-1980s. Institutional investors in the United States have discovered this investment class for themselves. Retirement funds in the US have been allowed to invest in forest plantations and forests since 1974.

The Harvard Management Company was instrumental in helping wood achieve its high degree of popularity. Between 1997 and 2005, this foundation of Harvard University built up a wood portfolio valued at more than US$ 2 billion and achieved a return of over 15% in ten years. In the last ten years, Princeton and Yale achieved even higher average returns on similar long-term investments.