Kiwis have been slow to see potential but that could be changing.
New Zealanders are increasingly sharing in the potential of the country’s plantation forests as they begin to grasp the significant opportunities of sustainably-grown timber combined with carbon sold through the Emissions Trading Scheme.
Jeff Dickie, a director of Roger Dickie New Zealand Ltd, a leading forestry investment business which has advocated for forestry investment for 50 years, says their quest is to educate Kiwis of the benefits of forestry and carbon investment, an asset class that now rivals real estate and alternative forms of investment.
The perception of many Kiwis is that forestry is foreign-owned – true, he says, to the extent that New Zealand hosts large scale timber holdings for some of the more sophisticated global pension funds and institutions. According to the Ministry for Primary Industries, 70 per cent of plantation trees were in overseas ownership in 2013.
Foreign investors have a range of reasons to invest in New Zealand forests, chasing our unmatched forest growth rates, our developed timber infrastructure and proximity to the fastest growing economies, a fundamental driver of timber demand. On top of this, New Zealand is seen as one of the safest, politically-stable places to invest, Dickie says.
Roger Dickie New Zealand has long focused on making forestry investment available to New Zealanders, with around half of its $1.5 billion managed estate available to retail investors in the form of syndicated partnership investments.
The most recently established innovative forest fund – the Awatea Forest Fund – gives New Zealanders the opportunity to buy a piece of a new green wave of smart and diverse forests from as little as $20,000.
In its first two years, this licensed management investment scheme has delivered solid results despite the economic backdrop. “We have had annualised returns of 11.8 percent since inception, and the fund is well positioned to capitalise on future demand for wood and stored carbon,” says Dickie.
Encompassing six properties, Awatea has a total land holding of 2225 hectares. The properties are in the Bay of Plenty, East Coast, Hawkes Bay and Wairarapa – deliberately spread throughout the developed forest-growing regions of New Zealand to reduce the risk of production being affected.
The fund is continuing to raise capital to purchase other properties at favourable prices to give it a total of 5000ha. Managed by Roger Dickie New Zealand, the fund is an advance on traditional forestry investments, because it unlocks the opportunity to add sales of the forests’ carbon credits under New Zealand’s Emissions Trading Scheme, says Dickie.
“Forestry’s storage of carbon, and the ability to measure that, gives us the opportunity in the fund to sell carbon as well as harvest forests. This makes for a dual income stream, another string to our bow – diversified income coming from the same investment.”
The fund focuses on a perfect blend of forests where the revenues derived from activities of the fund will be used to pay investor distributions. “The forests we have already planted are accelerating in carbon storage, providing meaningful income to pay investor distributions in 2025. We are breaking down that barrier of time, cashflow, risk-adjusted returns and liquidity for forestry.”
Dickie says the fund attracts both traditional and modern investors. Many are now seeing that forestry does not necessarily need to be a 30-year commitment. As the fund pools more investments, it will have the liquidity to allow investors to access the fund or withdraw from it.
The fund provides opportunity to diversify portfolios with an investment that generates income from carbon and timber as the trees grow in value and volume. Dickie says the fund is contributing to the nation’s commitment to positive climate change in a sustainable and renewable manner.
Areas of native and other exotic species are planted at the properties to better protect waterways, stabilise erodible areas and to foster biodiversity. Most notably, on suitable sites, redwoods are being established with their highly stable root systems, longer carbon cycle and unique timber qualities.
Investors want a diversified portfolio of investments, Dickie says, and see the increasing need for timber globally with population growth, urbanisation and timber technologies all contributing to increasing demand – while supply falls through massive clearing of slow-growing natural forests.
“Our plantation forestry has a great opportunity to fill the needs of the fastest-growing continents,” Dickie says. “We’ve seen it in China, and we are looking at India.”
He says foreign investors are astonished by the growth rates of our soft wood forests and appreciate our track record of lower risk of fire, disease and insects.
If Kiwis really understood the opportunities presented by forestry and the Emissions Trading Scheme, Dickie says we would be more advanced with climate change commitments, with investors enjoying the environmental and financial benefits.
For more information: Roger Dickie NZ – Forestry & Farming Investments New Zealand