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Wednesday 10 September, 11:00 – 12:30 FSC + 20 FORUM – Good money: Increasing the social and environmental returns from forest investments
Investor risk, returns and FSC
Brad Kahn · FSC US

Two themes emerged from the diverse and dynamic panel on investment: In the medium to long term, markets need to value all of the environmental and social benefits provided by forests, not simply timber. And in the near term, FSC certification can reduce risk and add value to forest-based investments.

zoom (© FSC A.C.) © FSC A.C.While FSC has achieved significant success in northern forests, expansion in the tropics depends on companies and investors pushing illegal sources out of the market. With costs 40 percent below legal sources, there is simply no way to compete with illegal timber, according to Roberto Waack, Chairman of Amata S.A.

As more financial organizations, including timber investment management organizations (TIMOs), market themselves to investors based on their environmental and social objectives, FSC is increasingly used to demonstrate that what happens on the ground is both credible and responsible. In some cases, FSC has been shown to generate market access and even market premiums that can boost returns, according to PF Olsen Australia’s Pat Groenhout.

While investment in plantations has grown dramatically, investment in natural forests is much trickier to secure – especially in the tropics. For many investors, natural forests represent a higher level of risk, both in terms of return and reputation. “To attract investors, you need to show that a natural forest is FSC certified,” said Hans Stout, Director of the tropical timber program at IDH.

FSC is a tool for investors today. It lowers risk by ensuring responsible practices and providing access to markets – and even premiums, in some cases. Yet the financial markets do not currently value other environmental and social benefits from FSC-certified forest management. Working with partners to change that – through policy and economics – should be a priority in the years ahead for FSC, panelists agreed.