Forests provide a wide range of goods and services that humans around the world consume on a daily basis. Wood is perhaps the most obvious of these goods—but forests also provide recreational opportunities, increase the value of residential property, sequester carbon, provide us with oxygen and clean water, and keep our natural world in balance.

Forestland investment, simply put, is investment in these goods and services—and firms that specialize in this field now play a larger role than ever in forest management. Over the past 30 years, large tracts of forestland globally have come under the ownership of Timberland Investment Management Organizations (TIMOs) and Real Estate Investment Trusts (REITs). REITs, which are structured like mutual funds, allow for broad investor participation, while TIMOs use money from large institutions such as pension funds, insurance companies, and university endowments to purchase and manage tracts of forestland directly.

Forest Field trip 2_resized

Chris Zinkhan (MF/MBA ’81) leads the 2014 Timberland Investments for Professionals short course field trip to the Duke Forest.

The rise of forestland investment has changed the economics of forestland management. Where once fiber-processing conglomerates cut forests to feed their mills—with sales of processed wood products being the source of economic value—today, TIMOs and REITs seek to maximize return on the forestland itself from a combination of timber and non-traditional forest products. Emerging markets for ecosystem services have allowed TIMOs and REITs to partner with conservation organizations to achieve mutual objectives, and conservation organizations, in response, have begun to use innovative financial strategies to protect forestland.

Today, over $60 billion in institutional investments have been placed in forestland, both in the U.S. and abroad. Why? Forestland is an attractive asset because it offers stock-like returns from timber growth and stumpage-price appreciation, bond-like risk similar to other real assets, and excellent portfolio diversification value from low correlation with stock market indices such as the S&P500. Furthermore, forestland is an ecologically sound investment. Companies buy forestland as a way to mitigate environmental impact, including Apple, which announced plans to invest in over 36,000 acres of forestland as part of an effort to “reassess its impact on the world’s paper supply chain” in April 2015.

Finally, the forestland investment sector is an open field for young people interested in careers that blend ecology, forest management, economics, and finance. The ability to work across academic and cultural boundaries is necessary for success in today’s complex and global forest products industry. Students who work toward expertise in both forest management and finance have an unprecedented opportunity to become leaders in forestland investments. This is due in part to the fact that there are relatively few schools training people in the field of forest finance.

To fill this void, Duke’s Nicholas School of the Environment currently offers the Timberland Investments for Professionals short course, and is developing a larger initiative that will open doors to students and young professionals interested in forestland investment. This Forest Finance Initiative aims to produce foresters who are prepared not only to help TIMOs and REITs achieve their financial and sustainability objectives, but who are also prepared to advance and innovate in the fields of conservation finance, mitigation banking, and the sale of non-timber environmental services.  Faculty, staff, and students will celebrate 75 years of Forestry education this fall – the perfect time to consider forestland investment as a career path for future Duke Forestry graduates as well.

written by Ramsey Meigs, MF/MBA ’17

APSAF

Ramsey Meigs (MF/MBA ’17) attends the 2015 Appalachian Society of American Foresters meeting with Duke Forest staff. (l-r) Jud Edeburn, Jenna Schreiber (MEM/MF ’12), Ramsey Meigs, and Sara Childs (MEM ’09).