Download - Oliver Hanke
Investment horizons in Impact InvestingThe need for long-term capital for sustainable business
Oliver Hanke
CEO Forest Finance Ltd
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ForestFinance Group
• A specialised sustainable forestry investment provider with headquarters in Bonn, Germany who offers more than 18 years of project development and investment expertise in forestry.
• Focus on sustainably-managed tropical mixed forest and agroforestry systems that offer similar rates of return and reduced operational risks compared to conventional timber investments.
• Developed over time into the largest provider of sustainable forestry direct investments in Europe with more than 12 000 investors. ForestFinance now operates € 60 million worth of forestry investments, employing more than 150 people worldwide and a further 540 subcontractors.
• Regional focus on Latin America and Vietnam and involvement in many other projects worldwide.• Advisor to the Green Growth Action Alliance’s new Global Sustainable AgroForestry Fund.
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Some other sustainable providers
• NewForests (Australia)• Salm Boscor (Germany)• Althelia Ecosphere (UK)• The Moringa Partnership (France)• EcoTrust Forest Management (USA)
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What is an investment horizon?
• The total length of time that an investor expects to hold a security or portfolio.
also
• The point in time when you hope to achieve a particular investment goal.
⇒ Used to determine the investor’s income needs and desired risk exposure
⇒ A highly subjective variable that changes over time and is strongly influenced by living
circumstances and goals.
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What is the typical investment horizon of an impact investment?
• Impact investments naturally try to build for (a better) future.
• That means taking a forward looking, patient and disciplined approach that goes beyond
economic cycles and short-term trends.
• The actual investment horizon of an impact investment can vary substantially
• Anything up to 20 or more years is possible (infrastructure, reforestation, etc.)
• … but it will most likely not be less than 3 years.
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Who can afford to wait that long?
• Pension Funds
• Foundations
• Individuals with substantial disposable income and long-term objectives
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When will they do it?
• A compelling story that does not rely on business cycles
• All risks are well understood
• Opportunity to achieve a high return premium for taking illiquidity risks
• All stakeholders are aligned and supportive
• and … when exit opportunities exist!• IPO
• Sale
• Repurchase
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So what about Agro-/Forestry?
• ForestFinance offers investment opportunities in sustainably-managed afforestation or reforestation projects as well as agroforestry projects such as certified cocoa production.
Forestry/timberland as an investment
• Offers low volatility
• Net return potential of 10%+ p.a. with low correlation to financial markets
• Real assets offer a natural hedge against inflation
• Potential for long-term land value appreciation
• Sustainable management practices also reduce operational risks and costs
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Afforestation with mixed native forest
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How to improve?
• Portfolio construction
• Diversification of investments
• Mature and new projects
• Multiple land use models
• Diverse sources of revenue
• Intelligent structuring
Afforestation with mixed native forest
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