Listed timber equity investments are leaving their niche status and require further attention with regards to their technological, economic, financial and sustainability characteristics.
The White Paper resulted from a collaboration between the Zurich University of Applied Sciences and Timber Finance. The study was co-funded by Built by Nature and the Migros Pioneer Fund and supported by the Liechtenstein Bankers Association.
It reviews the scientific literature on the climate performance of wood, particularly CO2 sequestration, CO2 storage, and the substitution effects of wood products. The economic, financial and sustainability characteristics of various timber related investment products are analyzed and provide a framework for evaluating timber investment opportunities.
Some of the key takeaways from the research work:
◼️ Timber investments have evolved from direct investments in forests in the 1980s to broader diversification into the forestry, paper, and packaging industries in the 2000s, and more recently toward timber construction in the building sector.
◼️ In recent years, equity indices focused on wood products and timber construction have outperformed general timber stocks.
◼️ Broadly diversified timber industry companies have achieved medium single-digit returns, with slightly higher volatility compared to the broader global stock market.
◼️ Some publicly listed timber companies produce short-lived wood products such as paper and packaging, despite the largest climate benefit being derived from the long-term storage of CO2 in engineered timber. Therefore, investors should carefully examine the sustainability profile of timber investments and differentiate between short and long-term forest products.
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