Investing in trees

If you’re looking to invest responsibly, you’ll be happy to discover that money can grow on trees. Joan Gill reports.

As public awareness about environmental issues grows, more and more people are looking for investment strategies that can help offset their carbon expenditure. Putting large sums of money into trees might not always spring to mind but forestry can be a good option as it has little correlation with the performance of stocks and shares, and is therefore not a volatile commodity.

A good way to diversify a portfolio, this type of commodity offers both monetary and social rewards.

While some choose to donate money to "buy" a tree, others prefer to capitalise on an investment over a specified number of years. Plant a Tree USA, Spanish-based Ecoforests Teak and Irish firm Greenwood Investments are some of the companies who are now opening up their market to single investors. Closer to home, Touchwood is getting Hong Kongers involved. Listed on the Hong Kong Stock Exchange since 2004, this young and energetic company is dedicated to preserving forests - and in the process it is making its clients very wealthy indeed.

Touchwood Marketing Manager Brent Clegg believes it is the public’s growing concern with environmental issues that has ensured the group’s success. “Touchwood promotes and protects biodiversity. The Earth’s ecosystems are among the most critical for preserving life on the planet; our investments help maintain the rain cycle, recycle carbon dioxide into oxygen, and help to reduce deforestation.”

The high returns clients yield probably don’t hurt either - at least 20 percent compounded over six years.

Touchwood has plantations in Sri Lanka, Australia and Thailand, and over 13,000 clients worldwide. The company offers Hong Kong investors the opportunity to invest in Agarwood from plantations in the Prachinburi Province of Thailand.

Agarwood trees can grow to 60 metres (and usually reach 12-16 metres by the end of six years). Popular due to its versatility, Agarwood is used in incense, medicine (especially for anti-asthmatics), meditation aids and even as an aphrodisiac in perfumes. The high demand for Agarwood products makes it one of the most expensive types of timber on the market.

While corporate clients are welcome to buy whole plantations, individuals can buy between 46 and 920 trees - and it’s worth noting that by planting just 46 trees, you are enabling 30,000 tons of carbon dioxide to be absorbed.

It costs US$5,490 (HK$42,800) for the smallest plot of 46 trees, and the projected harvest value over six years is US$13,588. If you chose to invest in 920 trees (for the price of US$96,420), you can expect to earn a whopping US$271,755 after six years.

Returns are seen at the end of the sixth year when you are given the option to extend for a further 12 months. This additional year increases the quality of the timber, giving a higher yield. At the end of your investment period, the trees are cut down and sold. The land then reverts to Touchwood and a new investor.

Before you make that environmental investment, it’s reassuring to consider that Touchwood has a Plantation Health Monitoring and Surveillance System (PHMS) plan. It only plants trees that are indigenous to the area (in this case Thailand), so there is no risk of disease being imported. There is also very little chance of fire, as trees are fenced off and watered regularly, and guards are on site at all times.

In any case, Clegg promises that each investment is protected. “If a client buys 46 trees, he will harvest 46 trees - we won’t say, ‘Oh sorry, one or two of your trees died.’ However many trees a client buys is how many he or she will harvest.”

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