Global timber is spiralling towards a tipping point, with demand for fibre outpacing supply, and it’s just a matter of…by how much. That is according to a new assessment by Gresham House, one of the world’s leading nature-positive asset managers, which said rising timber prices and a growing focus on ESG make timber assets a strong investment.
“From our analysis, future supply is projected to fall short of demand, with the best scenario showing only a 1.1x increase in supply compared to current levels – significantly short of the projected 1.5-1.8x growth in timber demand,” Gresham House said today. “This demand-supply gap is even worse under the base case scenario, where projections remain static at current levels, and the downside scenario, which assumes supply will fall below today’s levels due to heightened forest disturbances.”
In addition to an increase in disclosure and reporting standards, which drives more value for PEFC and FSC-certified forests, the asset manager expects market liquidity in the sector to increase as more investors seek to invest in green assets, with timberlands serving as a valuable tool for asset diversification: “In addition to traditional timber revenues, timberland assets are increasingly generating income from various sources, including renewable energy initiatives, ecotourism, strategic land sales, carbon credits, and ecosystem services,” it said, a trend that should only persist as global governments transition to a low-carbon economy.
Gresham House’s assessment follows the Australian government’s publication of a new Timber Fibre Strategy, which in turn, will help drive its $300 million investment in the industry. The strategy, which will guide the country’s $100 million Australian Forest and Wood Innovation (AFWI) research institute, aims to address the long-term decline in plantation establishment, which peaked in 2006 but has remained flat since the Global Financial Crisis (GFC).
“The most sensible and reliable strategy in the face of domestic needs and global headwinds is for the Australian forest products industry to meet the future domestic demand for timber fibre-based products by growing that timber fibre in its forests and doing so more efficiently and innovatively than has been done to date,” according to the 181-page report prepared by Fifth Estate. “Governments at all levels must recognise and support the timber fibre industry as critical, with land use policy and decisions overtly recognising timber fibre production as a vitally important land use, and all government policy and regulation must consider the impacts on the potential for land to be used for timber fibre production,” it said.
- To learn more about the Timber Fibre Strategy, click here to visit Wood Central’s special feature on Monday. And to learn more about Australian Forest and Wood Innovations (AFWI) – Australia’s newest research institute for forestry, click here.
