Best practice is needed for impact investing in sustainable forestry
98% of investors recognize the importance of standardized impact metrics for their investment decision making. However, to date non of such metrics adapted to the forestry context were available. Consequently, forestry is underrepresented as an asset class in large investment portfolios (Glauner 2011, p. 14) due to the absence of widely accepted forest valuation standards including performance assessment methods. Investors and loan officers feel impeded to allocate capital into this nontransparent market. High transaction cost for individual forest valuation and due diligences make investments unattractive. A low liquidity for immature forestry plantations in the secondary market further inhibits capital flow. To unleash more investments into the sustainable forestry sector, globally accepted standards need to be developed to measure, evaluate and report on the forest project performance. Decision makers on the high strategic level will then be enabled to evaluate forest investments more accurately. Best practice standards which measure the social, environmental and financial success will help to grow the credibility of the forestry investment sector.
Proposed performance metrics to evaluate sustainable forestry deals
Addressing the lack of standardized performance measurement tools, OpenForests has compiled a comprehensive and structured set of performance metrics (FairForest Metrics) to describe and measure the level of sustainability of forestry ventures. FairForest provides about 170 metrics to quantify the performance of the projects with the following focuses: