The Investor Profiles and Motivation for Financing Forests and the Strategies they Need
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What do Jack and Jill, Little Bo-Peep and Humpty Dumpty have in common?
Well apart from being the protagonists of famous children’s nursery rhymes, they all suffer a consequence from lack of strategy, lack of clear objectives, and not mitigating risk. If they would have thought this through – Jack and Jill could have safely collected their water, Little Bo-Peep would not have lost her sheep (or she would have found them) and Humpty Dumpty, well – maybe he wouldn’t have sat on that wall in the first place.
In this unconventional article, I’d like you to meet my version of Jack, Jill, Bo and Humpty. Some classic avatars of forest investment, in need of a good strategy.
Meet Jack
Jack has just taken a role within the moderate-sized family office he works for to develop the organization’s natural capital strategy. They’ve been hearing a lot lately about the climate and nature benefits of investing into real assets, like forestry and agriculture – with stable risk-adjusted returns. Jack is on a steep learning curve, and because it’s a small organization – it’s just him. Jack has been to a couple of conferences and received presentations from some of the Fund Managers presenting at the conference. They both seem good – but are there more Managers out there that can meet the goals of the family office? What are their natural capital objectives for that matter? What are realistic targets? What risks should Jack be aware of? What should Jack ask of prospective Managers in terms of their investment process and ongoing oversight?
Meet Jill
Jill is the Business Development Manager at timberland investment management organization. She’s been given the green light to develop a new strategy to appeal to the expanding impact investor profile that cares about climate. Jill sees that many of her timberland investment management peers are already promoting new strategies that address this opportunity. She’s not sure how to bring an edge to their strategy. She doesn’t want to recreate the wheel, but she want’s their strategy to be meaningfully different – and succeed at securing investment and building a high-quality pipeline, where they have a competitive edge. She knows that they will need to improve on their carbon accounting, but she’s not sure how to take this – and set concrete targets, how to translate those targets into asset characteristics and how to ensure that this strategy still holds true to the fundamentals of timberland investing.
Meet Bo
Bo leads the nature-based solutions team at a large Fortune 500 company. Until now, their strategy has been to buy carbon credits through a third-party. But given the rising pressure on integrity in the voluntary carbon market she thinks its time the company gets closer to the projects they are supporting. She’s also intrigued by the possibility of financing projects not just for carbon returns, but for financial returns as well. Before making a big strategy shift, she needs to know more. She wants to understand first and foremost, how to build a portfolio of high integrity forest carbon projects, but secondly – learn the different ways these assets can deliver classic returns to the company’s balance sheet. It’s really important to her and the firm that they understand all the risks involved. They are extremely sensitive to media attention and have the fear that if they seek financial gains with this strategy, their climate initiatives and their own integrity will be scrutinized.
Meet Humpty
Humpty is the CEO of a forest enterprise that produces high quality sawlogs for the local market. It has always been important to Humpty that they practice sustainable forest management, where achieving and maintaining forest management certification has been a top priority. Humpty has recently been offered some degraded marginal land to build the company’s forest assets, but he’s not sure if it would be good for the product they are known for. He starts to wonder if he could instead develop the land with native species for carbon markets. He’s thinking about all the benefits that this could create – carbon credits, improved hunting and recreation opportunities, biodiversity, and water improvement – the list goes on. He pitches the idea to his investors, but they are concerned that this would be a distraction from the main business. How can Humpty best focus his efforts with this expansion opportunity so that it will be a profitable endeavor, while also delivering on non-traditional timber returns?
Forest Impact Investment Strategy Development
I’ve worked with the likes of Jack, Jill, Bo and Humpty in the past, and have developed a forest impact investment strategy workshop for people like them and their organizations. If you see yourself in these Avatars, or think you might have a similar strategy challenge, I invite you to participate in the workshop. You can learn more about it and register here.
Book the Forest Investment Strategy Workshop Now
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