The world of investments, capital, stocks and shares can seem very far away from the natural world. The rapid movement of __money from institution to institution, zipping across the world through transfers and clicks is the antithesis of slow-growing forests or reefs deep below the waves.
Yet investment in the natural world is booming and not just as a result of environmental concern. It’s starting to look like where the smart __money is.
Data recently published by Forest Trends shows that the amount of private capital invested into the natural world soared by 62% between 2013 and 2015.
“The findings of this report speak to the growing recognition of our forests, our wetlands, our reefs, and other natural landscapes as smart investments – a notion that would have been unthinkable to most mainstream investors just five years ago,” said Michael Jenkins, president and CEO of Forest Trends.
“Just in the last two years covered by this report, we’ve seen a huge leap in demand for these kinds of tangible ‘real assets’ from investors. The demand is growing across the globe and from across investment instruments – the only thing keeping these emerging asset classes from surging even higher is the scarcity of investable opportunities; and, as in any emerging market, transparent information is critical.”
It is certainly true that finding natural world investments can be challenging. However, for investors who want to funnel their money into opportunities that promote habitats and nature, there are a number of opportunities.
Truffles
While truffles have always held such value that they have been referred to as ‘black diamonds’, it has not previously been possible to cultivate them routinely. That changed in 2015 when a plant biologist succeeded in farming truffles; an investment opportunity that was snapped up when he appeared on Dragons Den.
Now it’s possible for everyday investors to also get a slice of truffle action, via the Edinburgh-based company Truffle Farms Europe Ltd (TFE).
The company is cultivating 25,500 young oak trees, 5,000 of which have been planted in the south of France and are available for purchase by private investors.
It’s producing the highly lucrative French Black Périgord Truffle, or Black Winter Truffle. With a retail value of up to 2,400 euros per kilogram, the Black Winter Truffle is currently the highest valued, cultivatable truffle on the market.
Investors can buy the trees in batches of 25 up to a maximum of 500 and receive 80% of any truffle crop during the life of their licence and up to 50% of the tree sale price.
It’s not a cheap industry to enter, however. The maximum purchase of 500 trees will cost £95,745, although TFE estimate that could return more than £805,000 based on a maximum yield of 128kg p/hectare and a wholesale average p/kg price of €500.
Entry level investors will pay £7,836 for 25 trees, which TFE estimates will return £35,466 over 15 years.
It’s also possible to pay monthly for the trees, which the company says that the system is, in essence, a long-term, high yielding ecological savings plan.
Of course, despite the work that TFE has done to harness a more reliable truffle crop, crop failure is always a risk for investors. But for those willing to take the chance, investing in truffles can provide a green slice of a luxury market.
Forests
One simpler way to invest in woodlands is to buy a woodland. Some people simply buy non-commercial woods and there are even mortgage products available to help make that possible.
Such woods can accrue value but that’s dependent on finding an interested buyer. However, investing into a forest plantation intended to generate a commodity – namely logs or pulp, chipwood and fuel – can net a decent return.
According to the Forestry Investment Consultancy (FIC), forestry land can be acquired for as little as £300 to £600 per acre and, while returns vary over time, historic 15 year returns have been as high as 7% per annum.
Interestingly for some investors, there are some real tax incentives for investing in forestry. There’s 100% inheritance tax relief once the first 24 months have passed and no income tax to pay on timber harvesting revenues. There’s also no capital gains tax to pay on the increase in crop value.
Consultancies such as the FIC and websites like forests.co.uk and woodlands.co.uk exist to match up would-be buyers with woodland for sale an investors can pay anything from a few tens of thousands to hundreds of thousands of pounds for larger sites in popular locations such as southern England.
However, a forest is not an investment that can be bought and ignored; the sites require active management, maintenance and insurance.
A less hands-on option is to invest in a forestry fund. There are a number of investment opportunities, for example, last year the company FIM launched a direct forestry investment fund, allowing investors to access the benefits of owning forest without any of the land management responsibilities. That particular fund has a minimum investment of 5,000 euros.
Fund manager Timo Hakulinen says: “Forests are sound investment targets and offer a less risky alternative compared to, for example, equity investments. Trees keep growing even in times of economic downturn.”
Oceans
The planet’s oceans are over-fished and 40% of fisheries are considered to be overexploited or collapsed, according to the report Investing For Sustainable Global Fisheries.
Yet there is potential to protect fishing stocks and ocean habitats for the future and make a good return on investment.
Investment from private individuals and other stakeholders could scale and accelerate fisheries reform by maintaining or restoring fish stocks, reducing bycatch of non-target species and protecting or restoring marine habitats.
Unlocking private capital to achieve those aims is not just good for the planet, it can deliver a decent return. The report suggests that impact-oriented business models benefiting from stock stabilization or restoration have the potential to generate equity returns between 5% and 35%, using conservative growth and exit assumptions.
Encourage Capital, the company behind the report, commented: “Private capital can play several key roles in advancing sustainable fisheries. Investors’ holistic approach and return-seeking discipline can foster greater accountability in the design of fisheries management improvements, by aligning financial performance to successful fisheries management.”
It’s not straightforward for private individuals to find sustainable ocean investments. However, reports like this are increasing awareness of the potential for sound returns from environmentally sustainable investments, making opportunities increasingly likely in the future.
Looking for credit card or current account deals? Search here