Barron's Finds a Modern Day Money Tree

Impact investors like to grumble that there aren’t enough investable deals available, so we were encouraged to read an article recently in Barron’s about EcoTrust, a forestry fund generating returns while managing for environmental impact.

Ecotrust, operating in the Pacific Northwest, plants mixed-species, polyculture stands rather than just one species. While their peers focus on cultivating douglas fir monocultures, Ecotrust  purposefully thins their stands to encourage growth of red cedar, redwood, and spruce. We’re similar in our approach in that we plant 4-5 native tropical woods along with non-native teak.

Ecotrust is also taking advantage of ecosystem services payments such as conservation easements and some carbon credit sales. While the US has a significantly more advanced carbon market than Panama, we think in the next 20 years those markets will develop, enabling us to increase the return to our investors.

Finally, Ecotrust is focused on properties in economically distressed areas and high value conservation forests, and they receive certain tax credits and incentives for making investments in these areas. The Choco-Darien rainforest, where we work, is designated by Conservation International as a biodiversity hotspot. At the moment there are no incentives that recognize sustainable forestry in the area, but we are positioned better than our monoculture peers to access that “soft capital” if it becomes available.

It heartens us to see a pioneering forestry fund in the US receiving recognition in the mainstream financial media such as Barrons, and we hope that it leads more impact investors to see the financial and environmental potential of sustainable forestry.

Reforestation Act Proposed for Haiti and Armenia

Satellite image showing deforestation in Haiti. This image depicts the border between Haiti (left) and the Dominican Republic (right).

An aid from Senator Dick Durbin’s office recently asked us to provide feedback on a bill introduced by the Illinois Senator that would reduce deforestation and promote reforestation in Armenia and Haiti.

The Haiti and Armenia Reforestation Act of 2013 intends to promote forestry, agroforestry, sustainable agriculture, pay-to-protect schemes, and local stewardship of forests in Haiti and Armenia, two countries that are largely deforested--98 percent and 93 percent, respectively.

The types of activities that would be eligible for funding through the bill include pay to protect programs, seed capital to forestry and agricultural cooperatives, technical training and oversight for reforestation efforts, adoption of clean cookstove technology, and technical and business training for local communities.

This bill brings to mind a framework for investing in forestry that was defined in the Guide to Investing in Locally Controlled Forestry. The guide, published by the Forests Dialogue and the Growing Forest Partnerships, divides forestry investments into two classes: enabling investment and asset investment.

Enabling investment is the foundational kind of capital that helps make forestry industry more attractive to traditional asset investors by securing land tenure and developing business and technical capacity. Asset investors benefit from enabling investment by investing in organizations that are better managed and more sustainable.

Funding through the Haiti and Armenia Reforestation Act of 2013 could be a powerful enabling investment because it would help address one of the key barriers for asset investors: lack of business capacity of the organization receiving financing. With grant support, NGOs or local government agencies could help small forestry enterprises become more “investable” by building their business and operational acumen.

We're inspired by the leadership of Sen. Durbin in proposing this bill, and hope that it is eventually passed into law once the government reopens.

Will Herbicides Reduce Long-Term Yields?

An employee taking a break from manual cleaning between plantain treesA recent article in the NY Times highlighted that a number of farmers in the US corn belt are seeing diminished returns from the use of popular herbicide glyphosate, or more popularly known as RoundUp.

This herbicide is a very popular tool used by plantation companies in Panama to control the quick growing undergrowth that can impede the development of trees.

What's most interesting is the story of a farmer who used the herbicide frequently and then stopped because he noticed his soil compacting and required a bigger tractor to till it. Since stopping using glyphosate he has continued to realize average to above average yields.

We’ve don’t use glyphosate to control vegetation growth on our plantations because we want to protect the long term fertility of our soils. We believe this will ultimately lead to better growth of our tropical woods and plantains. There’s also the obvious health risks of exposing our employees to to hazardous chemicals through fumigaition.

It will be interesting to see the longer term studies on the impacts of using this herbicide on crop yields. In the meantime, we look forward to comparing our long term results results to those forestry companies using glyphosate to control vegetation.

Paper Finds Key Role for Nitrogen Fixing Trees to Capturing Carbon

Photo by Marcos Guerra, Smithsonian Tropical Research Institute

Princeton University recently published a paper on carbon fixation by legume trees. It found that growing nitrogen fixing trees, or legumes, in recovering or new forests improved the forest growth and carbon storage capacity.

The increase in carbon storage capacity occurs because the nitrogen fixing trees provide their neighbor trees with that key nutrient that is important for tree growth. According to the study, legume species of trees took up carbon up to nine times faster than other species. They also accumulated as much as 40% of the carbon of a fully formed forest after only 12 years.

There are two findings that are important for our own work.

The first is that having legume trees as part of a reforestation project accelerates the growth of other trees in the stand; an important benefit for managed timber plantations. We plant Rosewood (dalbergia retusa), a leguminous species, throughout our 25 hectares of mixed species plantation.

Secondly, the trees sequester and store more carbon because they’re growing quicker. That is very important for those of us concerned with climate change and the need to slow and stop the CO2 levels in the atmosphere.

We hope more research is done in this area and look forward to maybe even participating in it in the future. Learn more about the tropical woods we’re growing.