Forest Invest

Join me today in the first of a two-part series, as I speak with Peter Chappell, Investment Manager at Finnfund - the Finnish Development Finance Institution which, like the country, has a long history of investing in forests. In our conversation, Peter explains why Finnfund’s mandate is for greenfield investments, and why financial viability is one of their primary impact criteria. We discuss the risks in the emerging markets where Finnfund invests, compared to those in timberland core markets. We discuss how to evaluate risk and the merits of forest investment in emerging markets, and talk about why its important to go in with an experienced partner. Next week, be sure to tune in, where we discuss the impact-side of Finnfund’s forest investment approach with Anne Valto.    “But actually, our thesis is quite strong that ultimately the realisation of these positive impacts can only be sustained through financially viable, financially sustainable, you know, long term, successful businesses.”Show notes:Host: Shauna Matkovich - The Forest Link Producer: Magdalena Laas - https://www.linkedin.com/in/laasmagdalena/Details 01:36Introduction to Finnfund and their approach to forest investment04:54Financial instruments used by Finnfund in forest investment07:02Timberland in core versus emerging markets11:03Real vs perceived risk13:33Greenfield vs brownfield16:27Tips for investors considering emerging markets for the first time19:51Red flags to look out for in emerging market deal evaluation22:16Impact in emerging markets vs core markets27:53Challenges leading to emerging market track record30:46Other benefits of emerging market forest investmentSignificant quotes:[14:48]            "One of the issues we have as a DFI is that actually a pure brown field operation doesn't actually fit our mandate because we need to ensure we're making impact."[21:10]           "Generally speaking, execution risks are the big risks."[25:32]          "But actually, our thesis is quite strong that ultimately the realisation of these positive impacts can only be sustained through financially viable, financially sustainable, you know, long term, successful businesses."Links mentioned:Finnfund: https://www.finnfund.fi/en/ Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

Join me today as I speak with Aleksandra Holmlund, CEO of Qarlbo Biodiversity for a glimpse into the biodiversity crediting mechanism she has championed in Sweden. In this conversation we explore the biodiversity finance mechanism developed in cooperation with the Swedish University of Agriculture that focuses on production forest landscapes. In a nutshell, the mechanism works from a baseline of business as usual forestry and attributes any net gains in biodiversity to come from conservation, restoration or diversification of forest management activities. In addition to the mechanics, we discuss the sentiments of key participants in making this biodiversity credit transaction work – the forest owner and the credit buyer. Tune in to learn more about this very pragmatic approach to biodiversity finance in production forests and see if you can learn a thing or two to apply in your own forest investments.  Show notes:Host: Shauna Matkovich - The Forest Link Producer: Magdalena Laas - https://www.linkedin.com/in/laasmagdalena/ 01:26 Introduction to Alexandra and her background 03:06 Mechanism for biodiversity credit system in production forestry in Sweden 06:20 Example of integration of timber management and biodiversity management 08:50 Proportion of land dedicated to each (specific property owner) 10:12 Carbon credits in Sweden 11:51 Effect of policy changes and legislation on biodiversity offsets and markets 14:16 Buyer’s motivation of obtaining biodiversity credits (specific example) 17:05 Local or global market opportunities? 19:04 MRV process for conservation, restoration and diversification & target setting 22:24 Market price for biodiversity & loss of harvesting income 23:22 Interest from forest owners in biodiversity pilot project 24:15 Funding? 25:06 Duration of commitment by forestry owner (20+ years) 25:48 Mitigate risk of forestry owner quitting project 26:52 Development of biodiversity certification – Swedish Biodiversity Alliance 29:10 Methodology applicable in another jurisdiction 31:30 Data collection methods & fine-tuning metrics 34:26 Actionable advice for investorsSignificant quotes:[10:49]  At this early stage, where we are in the development of the biodiversity credit market, I’d say it is better to keep carbon and biodiversity apart just to be on the safe side, not to trigger any unwanted consequences such as greenwashing critique.[15:44]  A transparent market will allow private funding of biodiversity and enable forest owners to engage in more nature conservation and restoration than we would have had if only taxpayers’ money was paying for everything. Links mentioned:Qarlbo Biodiversity: https://www.qarlbonac.com/Portfolio: https://www.aleksandraholmlund.com/LinkedIn: https://www.linkedin.com/in/aleksandra-holmlund-5b04101/ Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

Join me today as I speak with Asger Strange Olesen and Herbert Yancey of the International Woodland Company, Asset Management + for an informative discussion on the EU Taxonomy. In this conversation we dig into the differences between the SFDR and the EU Taxonomy and how investors are looking at these sustainability regulations and tools. Though largely a concern for European investors, we talk about why it matters in forest investments the world over and how IWC AM+ is applying the EU Taxonomy in its approach to sustainable forest investment. We talk about the potentially affronting aspects, such as costs, management burden and how compliance will be monitored by the regulatory authorities, and spoiler alert – it’s not a drag on returns and will support the management of resilient forests.“If you are not considering climate change with your forest assets, you’re doing a disservice to your investors”Show notes:Host: Shauna Matkovich - The Forest Link Producer: Magdalena Laas - https://www.linkedin.com/in/laasmagdalena/Details01:50Asger gives an overview re. EU taxonomy, SFDR (Sustainable Finance Disclosure Regulation), impact on investments05:50Asger give more details about SFDR to avoid large-scale green washing06:40Asger explains how the disclosures moves from asset level to financial regulatory authorities08:15Looking at forest funds from different perspectives10:39Herbert explains American sentiment in investment regulations13:23Asger explains how IWC view EU taxonomy in the assets they manage16:10Asger explains about the learning curve translating financial regulation into investment strategy18:30Asger explains specific metrics (broad & context specific)20:47Herbert gives the American perspective – enhance forest resiliency22:53Asger adds to Herbert’s point – explains how SDFR works – making your methods transparent and comparable (it’s njot compulsory)24:50Asger gives a summary, touches on exploitation of the asset, if not sustainable, investors will move away26:17Asger explains the operational cost differences expected in an EU taxonomy aligned asset vs a non-taxonomy aligned asset28:49Asger elaborates on how aligning the EU taxonomy with one’s investment strategy build value in asset management (including point of exit opportunities)31:03Asger talks about how SFDR and EU taxonomy compliance will be monitored37:47Actionable advice to investors from Asger and then Herbert34.58IWC contact detailsSignificant quotes:[22:47]            Herbert: If you are not considering climate change with your forest assets, you’re doing a disservice to your investorsLinks mentioned:International Woodland Company (IWC): https://www.iwc.dk/LinkedIn: https://www.linkedin.com/company/the-international-woodland-company/Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

Join me today as I speak with Thorsten Arndt, Head of Advocacy at the Programme for the Endorsement of Forest Certification (PEFC), where we discuss PEFC and how in addition to facilitating sustainable forest management, it can help those with forest products in their supply chains align to various voluntary and mandatory sustainability disclosure requirements. We dig deep into the EU Regulation on Deforestation Free Products, or EUDR, and about how PEFC is thinking about carbon certification. Show notes:Host: Shauna Matkovich - The Forest Link Details01:37Thorsten introduces PEFC05:08Sustainability reporting under various voluntary and regulatory standards10:10Regulatory sustainability disclosures and the EUDR14:16How PEFC can support in meeting the EUDR20:20General public interpretations of the EUDR and what this could mean for sustainable forest management21:31Carbon certification and PEFC25:13How should investors be thinking about forest asset evaluation in light of forest management certification and EUDR27:01PEFC and its multistakeholder process28:07Actionable piece of advice for new investors29:05Contact detailsSignificant quotes:11:15 “Under the scope of this regulation [EUDR] are essentially any kinds of products that enters the European market for several commodities including soy, palm oil, beef, rubber, cocoa, coffee and timber”.20:20 “What we fear may happen [with the EUDR] is that an unintended consequence is that European consumers do not care about sustainability that much anymore because they will know that the products they buy are deforestation free.”24:16 “The other option we are exploring is to collaborate and coordinate with existing carbon standards to see PEFC and carbon standards can be implemented in a more coordinated manner to reduce the burden on smallholders and the forest.”Links mentioned:PEFC: https://pefc.org/Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud      

Join me today as I speak with Andrea Braun, Director of Unique Forest Investment, where we dive into all things Paraguay – well related to forest investment that is. In our conversation, Andrea describes why Paraguay is becoming a favourable forest investment destination – covering several macro-level indicators as well as forest specifics relating to biological and climatic growing conditions, markets and industrial development. We talk about risks and opportunities, and get into the details on some of the technicalities of managing forests in Paraguay.  “There are not as many places in the world that offer as good conditions for forest investments as Paraguay, especially in terms of climatic and biophysical conditions”Show notes:Host: Shauna Matkovich - The Forest Link Producer: Magdalena Laas - https://www.linkedin.com/in/laasmagdalena/Details01:30Andrea introduction and overview of Unique Forest investments02:36Why Paraguay is favourable for forest investments04:26Eucalyptus species – more than 90% in Paraguay05:18Issues investors should be aware of in Paraguay06:00Details of the mill to come online06:22Rotation for pulp and paper07:09Paraguay’s political environment and legislation: positive or negative for forestry investment?08:05No limitations to acquire land – how tenure operates08:31Currency risk in Paraguay?09:42Forestry infrastructure in Paraguay10:54Current market – for export or local use?13:23Opportunity for enhancing biodiversity in land use – historical deforestation and legislation16:42Species of trees used17:40Climate change risks19:35Management regime to limit climate risks20:10Benefit of voluntary carbon market23:36Balance quality, carbon credits, and eucalyptus27:17Plantation forest management29:59Where is wood processed?31:42Road networks & infrastructure or professional services may affect logistics33:27Actionable piece of advice for new investors35:42Contact detailsSignificant quotes:02:32 “There are not as many places in the world that offer as good conditions for forest investments as Paraguay, especially in terms of climatic and biophysical conditions”07:20 “Also the tax regime, labor costs and low energy costs have made the country quite attractive when compared to some of its neighbors […] where the Latin American Economic Climate Index identified Paraguay as having one of the best ease of doing business in the region”.21:15 “And this [carbon markets] has been very, very interesting for our clients and Paraguay has actually been quite fast and has issued a law to regulate the carbon credit production for private investors.”Links mentioned:Unique Forest investment: https://www.unique-forestinvestment.de/Andrea’s email: andrea.braun@unique-forestinvestment.deSound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

Join me today as I speak with Edit Kiss, Co-founder and Managing Partner at Integrity Capital Advisors. She discusses Integrity Capital Advisors three-pronged strategy for unlocking capital for nature: 1. Imbedding carbon with real assets 2. Appreciating the capital continuum, and 3. Blended finance. We discuss the equity-type risks investors face when funding forest carbon projects, and solutions to lower the cost of capital. We also dig into the importance of price transparency – for investors, carbon credit buyers, and project developers, and we talk about the importance of industry standards that support carbon markets.Host: Shauna Matkovich - The Forest Link Producer: Magdalena Laas - https://www.linkedin.com/in/laasmagdalena/ Details 01:01 An overview of Integrity Capital Advisors 06:22 Explanation about the obstacles – mobilizing of private capital side 08:37 Explanation about the mismatch in funding 11:42 A tool – Carbon Collateralized Loans 13:59 Necessity of blended finance 15:27 Paper on private investments in conservation 16:01 Integration of concessional capital 18:14 Carbon buyers wants to buy it but not pay the price 25:20 How to improve carbon price transparency 28:10 Science-based Targets Initiative 31:57 SBTI decision in July – submit feedback on form on website (below) 36:39 Actionable advice 37:17 Links (below Significant quotes:[09:18] Why we are struggling in particular in nature based, is because of the market failure and because of the fact that we don’t have a price on carbon.[19:41] We need a signal for capital to flow for investors to invest into this next generation projects.[24:11] What you need to be successful on the ground is to say, I’m going to get this carbon finance as a transition tool and when my crediting period stops and I have no more carbon, I have actually made the transition on the ground.[36:48] It is imperative that everybody needs to get involved, because the simple truth is that without the natural climate solutions there is no pathway to 1.5 degrees.Links mentioned:SBTI feedback form: https://docs.google.com/forms/d/e/1FAIpQLSc93Gz8_R-ShYeaFAuXc_fqrKZQC1ayvnEw1WorQVfxYZ8KgQ/viewform CPIC paper: https://www.cpicfinance.com/insight/new-report-towards-building-a-capital-continuum-for-nature-positive-investments/NCSA paper: https://www.sustainability.com/globalassets/sustainability.com/guides/ncs-investor-guide.pdf Edit Kiss: https://www.linkedin.com/in/edit-kiss-5156732/Integrity Capital Advisors: https://www.integritycapitaladvisers.com/ Sound Library:Nature by MaxKoMusic/Soundcloud Sopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

In this episode, I am joined by James Kench, Head of Insurance at Kita. In our conversation James discusses the role of insurance as an enabler to mobilize capital into natural climate solutions in forestry. He describes how their product has been structured to address the most significant risks observed in forest carbon projects, giving some insights into what those risks are. He explains that given its ‘newness’ in the insurance market and the period in a forest carbon project’s life when it is most likely to experience a claim event, that no claims have yet to be made. He gives some great advice to investors looking to participate in forest carbon markets, on what risks they should consider.  Details 00:37 Intro to James Kench & Kita 03:30 James explains about the different types of nature-based solutions 04:39 Typical client profile explained – corporates and investors 07:27 Insure every asset in the portfolio or asset by asset? 09:18 Portfolio vs individual – underwrite specific transaction 10:28 What happens if a project fails – dimensions of risk 15:09 Delivery risk & concept and execution phase until credits are issued 17:54 How Kita underwrites and how it affects pricing 20:55 Moral hazards 23:54 Characteristics that makes assets uninsurable 26:09 Process of raising capital for offering insurance 29:03 Future of carbon markets 32:17 Examples of actual claims 37:06 Contact details Significant quotes:[07:37]            The main pain point we wanted to solve is that there's reasonably good supply of carbon credits out there, but they're not necessarily a good supply of high-quality credits, and the best way to secure high quality credits is to lock in investment at an early stage of the project.[08:32]            If the project has failed or has not performed as much as hoped, then our insurance would kick in, and then we would be able to make the investor or the corporate whole, either in cash or in like for like carbon credits.[14:10]            But where we see investors coming in to lock in that supplier of the most high quality projects, they're very actively trying to source and originate projects all over the world and get in as early as possible because that enables them to secure that supply and secure a good price and then have hopefully a bit more influence and control over the sort of management and success of the project over the longer term.Links mentioned:Kita: https://www.kita.earth/LinkedIn: https://www.linkedin.com/company/kitaearth/Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

Today I’m joined by Steve Novakovic, Managing Director for the Chartered Alternative Investment Analyst Association (CAIA) Curriculum. CAIA serves its international membership across the finance industry enhancing education in relation to alternative investments. From Steve’s wide knowledge of alternative investments, he describes how timberland investment plays a very important role in building a balanced institutional investment portfolio that both serves fiduciary requirements and has strong sustainability features.Show notes:Host: Shauna Matkovich - The Forest Link Timecode Details 00:33 Intro to Steve Novakovic 02:02 Intro to CAIA 02:55 CAIA’s curriculum (limited partners, alternative investments) 05:19 Member organisations 06:12 Investors sentiments around natural capital investment, specifically forestry 09:40 Deliberate decision-making process and how long it takes 11:22 Geographical location of most experience within the asset class 15:09 Sustainability and impact requirements of European investors 17:32 Demand for education in the asset class 22:37 Educational approach about timber investing (TIMO) 24:55 Shift to sustainable investments 26:21 ESG investing 30:15 Expansion of CAIA’s offerings to its members (e.g., understanding value chain) 34:40 Teaching members about sustainability (UN principles of sustainable investments) 38:12 Actionable advice 40:50 Contact details (see below) Significant quotes:[03:02]            For better or for worse, limited partners is kind of what makes the industry run.     [09:40]            The decision-making process is deliberate, really intentionally. As a limited partner you are the steward of capital, you have fiduciary responsibilities for whomever it is you are managing the pool of capital for, and you have to be very cautious and mindful in your investment approach.[19:22]            Timberland is a very low risk investment.[26:18]            From an academic perspective, there is clear evidence that ESG focused are beneficial in that they reduce risk. [28:07]            As a fiduciary, you really are supposed to evaluate investments in the context of risk and return, irrespective of your perspective on the environment or social or governance or so forth.Links mentioned:CAIA Association: https://caia.org/Steven Novakovic: https://caia.org/contact/steven-novakovic-caia-cfaSteven’s LinkedIn: https://www.linkedin.com/in/steven-novakovic-caia/Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud