Corporate Social Responsibility (IVOR nr. 77) 2010/13.3.1.4:13.3.1.4 Conclusion regarding sustainable forestry

Corporate Social Responsibility (IVOR nr. 77) 2010/13.3.1.4

13.3.1.4 Conclusion regarding sustainable forestry

Documentgegevens:

Mr. T.E. Lambooy, datum 17-11-2010

Datum: 17-11-2010
Auteur: Mr. T.E. Lambooy
JCDI: JCDI:ADS371844:1
Vakgebied(en): Ondernemingsrecht (V)

To conclude this section 13.3.1, it can be noted that one of the strategies to reduce deforestation is to encourage investments in sustainable forest management. This sector has a unique investment profile, because forestry by nature has a long-term business profile. As the interests of pension funds arguably also have a long-term horizon due to the long-term liabilities from pension obligations,1 it has been advocated that investing in sustainable forestry could be especially attractive for institutional investors.2 However, even though forestry-related initiatives are becoming more popular among the private sector,3 it still appears difficult to attract substantial financing. An international, multi-stakeholder dialogue called 'The Forests Dialogue' (TFD) identified as the main obstacles: (i) constraints on institutional capacity; (ii) high costs associated with conservation investments; (iii) a limited demand from consumers for certified forest products; (iv) tax policies unfavourable to sustainable forest management; and (v) certain regulatory provisions contrary to maintaining and enhancing endangered species population.4

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Forest Re, An Insurance Contribution to Sustainable Forestry Investment, ITTO Presentation, 26-27 April 2006.

Attractive investment characteristics include strong physical asset backing in the form of land, standing timber and milling assets. Forest Investment Review, 2009, Chapter 2, Exploring Characteristics of Existing Forestry Investment Vehicles, at: http://www.forum-forthefuture.org/files/Introduction_FIR.pdf, accessed on 1 March 2010.

The major Dutch pension funds, ABP and PGGM, invest substantial amounts in sustainable forestry. Investments & Pensions Europe, ABP makes first timber allocation, 13 July 2007, where it states: 'The €211bn Dutch pension fund ABP has made its first foray into timberland investments with a $60m allocation to the Global Solidarity Forest Fund (GSFF). The fund will develop three sustainable forestry projects in the Republic of Mozambique, in south-eastern Africa, and Angola, in west Africa. Heerlen-based ABP, Europe's largest pension scheme, will acquire a stake of 60% in the fund through its 10-year investment. 'The GSFF is managed by the Global Solidarity Fund International (GSFI), an international investment manager owned by the Swedish diocese Vasteras, the Lutheran church of Sweden and the Norwegian 'Lutheran Church endowment',' ABP said in a statement. ABP sees the investment as a desirable way to diversify as it said in a statement: 'It delivers a stable [investment] and is expected to deliver high returns, too.' Projects will be certified by the Forest Stewardship Council (FSC), which has set up guidelines for sustainable forestry management, and the fund has committed itself to the United Nation's Global Compact principles. The scheme, which has allocated 2% of its entire assets to its new so called 'innovation portfolio', has no specific target for further forestry investments. (...). Earlier this month, the €85bn Dutch healthcare workers' pension fund PGGM also made its first allocation to forestry, with a $200m (€150m) 15-year forestry mandate. PGGM chose US asset manager GMO, who will invest the money in its Long Horizons Forestry Fund in North and South America as well as the Asia/Pacific region', at: http://www.ipe.com/articles/print.php?id=22547, accessed on 3 June 2010. See also: the APG Sustainability Report 2008, p. 18, at: http://www.apg.nl/apgsite/pages/images/VVB%20APG%202008%20ENG_tcm124-91870.pdf, accessed on 21 July 2010; P. Klop, World Resources Institute, 'Stocks, bonds and . trees', at: http://www.grida.no/publications/et/ep5/page/2359.aspx, accessed on 21 July 2010. All sites accessed on 22 May 2010.

The Forests Dialogue (TFD), Forest and Biodiversity Conservation, 15-17 May 2007. Available at: http://environment.yale.edu/tfd/dialogue/forests-and-biodiversity-conservation/fourth-regional-dialogue-on-forests-and-biodiversity-conservation/, accessed on 21 July 2009. Also see: The Forests Dialogue, Investing in Locally Controlled Forestry, 9-10 June 2009, at: http://environment.yale.edu/tfd/dialogue/locally-controlled-forestry/scoping-dialogue-on-investing-in-locally-controlled-forestry/, accessed on 3 April 2010.