Taking steps to foster investments into sustainable forestry

How FairForest Metrics helps to connect responsible investors with sustainable forestry projects

Global trade in forest products expanded since 1980, at about 4.5% per year (Schuler, 2005). This trend results in an increased pressure on natural forest resources, mainly through legal and illegal logging activities. To satisfy the increasing wood consumption, the demand for plantations rises further. Members from leading organizations like FSC (2012) state that production-efficient timber plantations are indispensable in order to ensure global supply and compensate the pressure on natural forests.

But what are the implications of industrial plantation operations, in particular on fragile soils of the tropics?

In many cases pristine forests are destroyed and replaced by industrial plantations. These plantations are usually monocultures of fast growing non-native and often invasive tree species, covering thousands of hectares. A uniform planting scheme leaves only little space for natural habitats. The susceptibility for calamities increases. Regular clearcutting activities and the use of heavy machinery lead to soil compaction. Therefore, plantations often result in non-reversible soil degradation characterized amongst others by the depletion of the humus layer and a shortage of nutrients and water.

The negative effects of current conventional forest management practices on the environment raises the questions about the long-term viability of such industrialized monoculture plantations. Conventional forest operations in the tropics have shown a limited performance in the medium-term and have left behind completely degraded soils. Soil restoration is a long term, costly process, that works only in some cases.

But what are the alternatives to respond to the market demands on a long run and without compromising the soil fertility?

The answer is: forestry operations which take the ecological dimension into account. They are more resilient and promise to last for an unlimited period of time.

The number of sustainable forestry operations is increasing worldwide, but considerable investments are still needed to unleash the full potential of the sustainable forestry sector so that it can become a viable alternative to the short-sighted approach. But although investment groups from the U.S. and Europe have shown increasing interest in extending their activities to this sector, the capital flow is still limited. One reason for this fact can be found in the present information situation surrounding sustainable forestry operations, which is diffuse, scarce and non transparent. In addition, a low level of investment experience in this area inhibits investors to take action.

This raises two essential questions:

  • How to overcome these investment barriers in order to unleash the existing investment potentials?
  • How to ensure that investments flow into forestry operations where high environmental standards are maintained and monitored over time?

The first necessity is a solid information basis. A minimal level of quality is required to correctly map the multiple dimensions of sustainable forestry undertaking. In addition, this information has to be easily accessible and understandable for all stakeholders. In order to enable a comparison of the multiple dimensions a consolidation of the information is necessary.

An efficient way to reach a high level of quality is to standardize the multidimensional information needed for decision making. Beside business indicators, the ecological and social dimensions have to be equally considered. The collection of standardized indicators will help local operators and stakeholders to ascertain and understand the level of sustainability of the different dimensions of their forest venture and further allow to compare different projects. This level of transparency increases the confidence amongst responsible and professional investors and allows them to evaluate the risk-benefit characteristics in an efficient way. Furthermore, the regular tracking of standardized indicators allows long-term performance monitoring and assists impact reporting.

Standardized performance metrics like IRIS and especially FairForest provide the framework to quantify the status quo of forest operations and investment opportunities. These metrics allow checking the quantity and quality of available information and functioning as efficient tools to determine the performance and sustainability levels of the operations.

FairForest Voluntary Rating comprehends multiple sections associated to the financial, environmental, social, management, business and production security dimensions. It assists a systematic detailed and differentiated ascertainment of the performance of each one of these sections. The rating is designed in a way which allows evaluating a wide range forestry projects. It has been created as a common ‘language’ for all stakeholders.

FairForest provides the level of transparency needed to build reliability and trust for investors setting free a more dynamic capital flow into the sustainable forestry sector. The monitoring and recognition of holistic performance metrics not only professionalize regular reporting activities, they further contribute to a broader perspective of measuring organizational success and to the preservation and regeneration of forest resources. Investing in healthy productive forest ecosystems is a prerequisite to guaranteeing the long-term timber supply.