Frontrunners show the way how to make sustainable forestry business work

Private investments are already the largest source of finance for forests, and this is likely to increase in the future. But its size is nowhere near to what is needed; moreover private finance and business is too often misaligned with local and global public interests. The challenge is how to scale-up private financing and business and how to make these investments more sustainable.

“Front runner companies show us the way”, says Herman Savenije of Tropenbos International, who presented the main findings of ETFRN News 54 publication entitled Good Business: Making Private Investments Work for Tropical Forests. “They have identified sustainable forest management as a new future market and business opportunity and see sustainability not only as a core corporate value and responsibility, but also as a business asset and effective risk mitigation strategy”. The many examples in the publication illustrate the way forward, including the hurdles to overcome. To make money flow to sustainable businesses, foremost the proper enabling climate needs to be set up; multi-actor national forest financing strategies be developed; front runners be incentivized, and coalitions and partnerships be facilitated. Key is to bridge the current disconnects between the finance and forestry worlds and between public and private sectors.

Tuukka Castrén of Profor/WB presented preliminary findings of an on-going study on Private Forest Financing Flows. “Despite lack of reliable data on financing flows, the good news is that there is a clear trend of increasing investments in forestry in tropical countries ”. Main impediments for forest sector investment include weak forest sector governance, red tape and bureaucracy, inadequate information, tenure insecurity, perverse incentives, and lack of technical capacity.

Murat Gigin, said that key to the success for his forest plantation company ENAT is that it has brought several sectors of public life under its umbrella: government, academia, foundations industry and investors. Environment concerns, profits and corporate social responsibility are the driving forces. To scale up business ENAT would benefit from extending land leases from 49 to 99 years, larger areas to be leased an a tax regime that takes into account the long production cycle of the plantations.

Dirk Walterspacher of Forest Finance highlighted that his company has managed to attract 12,000 private investors and the overall investment volume has been approx. 80 Million USD so far with operations in Panama, Vietnam Colombia and Peru. He emphasized the importance of certification for business credibility. He also notes the emerging interest of pension funds and institutional investors and initial secondary market opportunities of existing forestry assets. The existence of a long-term strategy for forests country-wide is an excellent sign for investors of sustainability and risk reduction.

Emilio Mugo of the Kenya Forest Service noted that his governments has changed various policies to encourage private sector involvement and observed an increasing interest for from both domestic and international investors to invest in multiple use forestland

This side event attracted more than 50 UNFF-10 participants, mainly government officials, and enabled a knowledge exchange between the public- and private sector.