Landowners & Forest Managers:
A Portfolio Approach Defined:
3GreenTree specializes in developing an innovative portfolio approach, where we create a diversified set of income streams customized to the property and the owner’s objectives.
Much like an investment portfolio, we look to balance risk and return from a forest business that is diversified and more resilient to market downtowns, while also positioned to take full advantage of market upswings.
This is accomplished by identifying undervalued assets from the property and then integrating those assets within the portfolio. Rather than focusing on only a single revenue stream (for example, timber), 3GreenTree monetizes potential returns from the sale of additional ecosystem goods and services, such as carbon credits, water, and biodiversity. When these asset classes are properly managed, a property can generate greater and more consistent revenue year in and year out by targeting the most lucrative market segments, and being flexible and responsive to changing market conditions.
About the Opportunity:
Current forest projects 3GreenTree has developed show a potential for 1.5-3 times higher return when carbon and other ecosystem services are included in the asset mix as compared to timber alone, along with lower effort, expenses, and capital requirements. Improved forest management practices create a direct carbon value, but they can also be compatible with recognized standards of forest stewardship (Forest Stewardship Council and the Sustainable Forestry Initiative, for example), which themselves provide additional market value. Furthermore, with proper planning and design carbon revenues can be complementary to a focus on highest quality, highest value timber products. In short, 3GreenTree can design land management systems around a single ecosystem asset (such as carbon), or for multiple integrated revenue streams to optimize risks and returns, and/or to achieve other landowner values.
Carbon credits are developed through a formal carbon project. A given project is designed in accordance with protocols specified by a particular voluntary or regulatory standard. Selection of a standard depends upon project objectives, and desired markets. Regulated (compliance) markets always specify and limit which standards are acceptable. Voluntary standards are common in unregulated markets. They complement the compliance markets in making allowance for innovation in methodologies and project types not currently included in compliance regimes. Carbon projects are subject to independent audit against rigorous global standards, which ensures their credits are real, additional, permanent, and measurable. The resulting credits are serialized and registered on a globally recognized registry where they can be purchased and used to offset carbon emissions. The price for a given credit is reflected in the standard used by the carbon project. Carbon credits generated for the compliance market typically command higher prices than voluntary standard credits because the former tend to require more rigorous standards. Carbon markets are developing and evolving rapidly. At 3GreenTree, our carbon project designs incorporate the latest in market and standard developments.
In general, forest carbon credits are created when there is a change in management practices from a baseline (the business-as-usual scenario) to a project scenario that results in a net gain in sequestered carbon. , Examples include activities that increase the rate of carbon storage (fertilization, for example), and reduced emissions from lower harvesting intensity, avoided harvest, or land-use change. At 3GreenTree, we have the capability to develop forest carbon credits from a project scenario that is fully customized to a specific property with a pre-defined baseline, or by comparison with regional management practice baselines. Our project design and development skills can include on-going project management and customized product market strategies.
Biodiversity assets can be monetized through a range of conservation finance mechanisms. Financing and tax advantages are realized in exchange for managing and maintaining biodiversity, key habitat, and other ecosystem attributes. These offsets represent a new and emerging opportunity that allow companies to finance ecosystem protection and offset any negative impacts of their operations on biodiversity. 3GreenTree is currently working to develop opportunities in biodiversity offsetting, which can be significant sources of additional financial benefit to landowners.
Multiple asset management
Timber asset value can be improved substantially by managing specifically for exceptional log quality and by adding FSC certification (currently the gold standard of forest certification). Our analysis indicates a chronic erosion in the competitive position of commodity timber in North America that will continue to impact timberland margins focused on short rotation timber (one possible exception are the highly productive plantations in the southern US). In contrast, we expect rising demand (and prices) for large-diameter logs of exceptional quality though their production will require longer rotations than currently practiced. Integrating forest carbon and other ecosystem services, however, can more than offset the revenue lost when shifting to a longer rotation. 3GreenTree can develop, monitor, and manage the complex planning required to integrate and optimize these multiple values, including a strategic shift to high margin timber, FSC certification, and advanced ecosystem-based management planning.
Additional ecosystem assets
Water quality and quantity is now receiving recognition as an important and highly valued ecosystem asset. Forests play a critical role in the management of water, and water resources can be developed and monetized as part of the asset portfolio. Significant examples of how water resources from forest ecosystems have been monetized are well documented, Forest ecosystems also provide additional benefits such as recreation, aesthetics, and habitat for endangered species. Recreational easements are a significant sources of land revenue in the southeastern US. Endangered species and wetland banking also have established markets in the US worth millions of dollars annually. Despite its extensive forested landbase, Canada is only beginning to realize its potential to participate in these emerging markets. 3GreenTree has identified promising strategies to incorporate water and these additional ecosystem goods and services into the asset mix.
So, let us show you how to make more from the forest, on a more reliable basis.
© Copyright 2012 3GreenTree Ecosystem Services Ltd.