Joanna Watson31 Jan 2020
How a long-term investment product could unlock finance for woodland creation and appeal to a generation of young people growing older in an over-heating world.
The problem
“It’s not an investment if it’s destroying the planet” (Vandana Shiva). By the time a young person entering work today reaches retirement age, global average temperatures on current trajectories could have risen to levels that make much of the world uninhabitable. So it’s unsurprising that some people are questioning the value of conventional savings and pensions, particularly if the funds behind them are contributing to the crisis.
At the same time, we need to unlock the finance to double tree cover in the UK by 2045. At the moment it is very difficult for ordinary people to invest in forestry projects in which they can have confidence. Often investment managers are looking for minimum investments of £50,000 or more for UK forestry. Forestry funds may also be contributing to deforestation and human rights abuses in the global south.
The challenge
Could we set up a fund that would allow ordinary people to pool their funds and invest in tree cover for the long-term?
The idea
A financial product that enables people to invest in woodland creation. The return on investment could be provided by timber – but also other woodland products and services such as nuts, or payments by insurers for reduced flood damage. Analysis suggests the value of timber is set to rise considerably over the coming decades, as demand for low carbon building materials increases.
The fund could draw inspiration from projects like Energise Africa, which enables ordinary people to invest in solar energy in Africa, and provides full transparency, for example by sharing with investors the locations and the stories of the projects they have helped fund.
How does it work?
- Ordinary people buy bonds – or other appropriate financial products – with long return periods.
- The capital raised is used to create new woodland, either by buying or leasing land on a long-term basis. This would require an appropriate intermediary – could be an existing or a new trust.
- The experience for investors is motivating and engaging; they get to see how their trees are growing over time and understand the benefits.
- One option would be to give people the choice of a blended contribution – a mix of donations and investment. This would create more flexible capital for the trust to invest.
- The products should be readily available to savers. What if trees were the new property, and building societies and other mutual started to develop offers that enabled the creation of new community forests?
- Under current rules it is unlikely that a project of this sort could be FCA-regulated. Investments would be at risk. But for people thinking differently about risk and wanting to mitigate these this might be less of a barrier.
Benefits
Creating a new funding stream to plug the finance gap for woodland creation – but that isn’t just charitable giving.
How do we know it works
We know there is demand. The issue has been raised through our #ownit1.5 groups (our pilot project supporting women to #takeclimateaction with their personal finance). Insight interviews conducted for our work on tree cover has also uncovered people increasingly looking to safeguard their future – and the planet – by planting trees where they have access to land. For younger people whose whole future is at risk investing in trees – however uncertain the return in conventional financial terms – feels a lot less risky that continuing to invest in a broken economic system.
Impact measurement
Money invested, hectares of woodland creation, number of savers.