Global investments in forests
Salm Global Timber Fund
Salm-Salm offers professional investors the opportunity to participate in the benefits of a globally diversified forest portfolio through the Salm-Salm Global Timber Fund. Forests significantly strengthen a portfolio, especially in the medium and long term. The growing world population and the accompanying demand for housing are continuously increasing the demand for wood. Wood is an optimal substitute for energy-intensive building materials such as steel or concrete. In addition, wood serves as a raw material for numerous other products such as furniture, paper or tissue. Land offers additional diversification, very low correlations to the main other asset classes and high inflation protection. Above all, however, forest is a green, CO2-neutral and, in the truest sense of the word, sustainable investment. Therefore, in many regions of the world, forest is an integral part of the capital investment of institutional investors and families.
Investment Process
General data
The Salm Global Timber Fund aims to build a sustainably managed diversified portfolio of commercial forests in the world's most attractive timber markets. Target regions for forest acquisitions are predominantly the USA and to a lesser extent Oceania and Europe. Salm-Salm acts as investment advisor for the search, evaluation, purchase, long-term and sustainable management, as well as the sale of the forests at the end of the fund term.
The Fund - Key Facts
- Strategy: Establish and sustainably manage a diversified portfolio of commercial forests
- Target regions:
- U.S.: 60 - 100% (Pacific Northwest, Northeast, Southeast).
- Oceania: up to max. 20 % (New Zealand)
- Europe: up to max. 20 % (Central Europe, Scandinavia)
- Ownership of the forest areas - no leases
- No use of outside capital - equity only
- Target IRR: 5 - 7% (net)
- Target distribution: Ø 2% p.a.
- Term: 15 years + extension option
- Target equity size: USD 250 million
- SFDR classification: Art. 9
- Final closing: Q4/2023
Investment Strategy
Salm-Salm focuses its investment strategy on a precise selection of forests. High quality forests in the strongest local timber markets are selected in an in-depth analysis. Salm-Salm only buys forests in countries that have the highest standards of property protection. Furthermore, the local biological growing conditions, climate and forest infrastructure play a decisive role in the investment approach. To reduce risks, the portfolio is diversified into different climatic regions, markets, forest types, tree species and age classes. An additional reduction of biotic and abiotic risks takes place within the operational management.
The main return drivers of a forest investment are biological growth and timber prices. For this reason, Salm-Salm uses an "intensive management" strategy to optimize growth. Only forests in very strong timber markets are purchased. To diversify revenues in forest operations, opportunities to develop alternative sources of income are actively pursued. For example, value-add measures such as solar or wind projects and the generation of Co2 certificates are implemented where possible and appropriate.
Through its presence on the ground and direct contact with service providers, Salm-Salm represents the owners. This is based on decades of experience in the agricultural and forestry sector with its own forestry and agriculture.
Sustainability
The concept of sustainability is over 300 years old and was originally defined in forestry: In the management of forests, more may never be used than will also grow back in a natural way (source: Hans Carl von Carlowitz). To provide evidence of sustainable management, all forests managed by the Fund are certified with an independent sustainability seal.
Forests are one of the largest carbon stores on earth. Compared to old trees, however, young trees absorb much more carbon. This is due to higher growth rates. Regular harvesting of the stands, including use of the wood as timber, as well as the associated subsequent reforestation of the areas therefore ensures a high level of carbon sequestration. For this reason, the forests of the Salm Global Timber Fund are not set aside, but actively managed.
The top priority is to ensure that the forests are clean and healthy. Salm-Salm follows the precautionary principle, takes initiatives to promote greater environmental responsibility, and encourages the development and diffusion of environmentally friendly technologies. At all stages of management, Salm-Salm ensures environmental protection. This includes a proactive approach to avoid or minimize the consequences of accidents that may have a negative impact on the environment.
In the course of management, child labor shall not be used at any stage. Compensation and benefits in service providers must comply with the basic principles regarding minimum wages, overtime and legally required social benefits. Forced or compulsory labor is not permitted. Salm-Salm, as well as service providers and affiliated companies, ensure occupational health and safety in the workplace and support continuous development to improve the working environment.
Sustainability Approach
Classified according to Article 9 SDFR
Classified according to Article 9 SDFR
Describes the way in which sustainability risks are included in investment decisions and the result of the assessment of the expected impact of sustainability risks on returns. Salm-Salm incorporates all relevant financial risks into its investment decisions as part of the investment process and evaluates them on an ongoing basis.
A sustainability risk is defined as an event or condition in the environmental, social or corporate governance area, the occurrence of which could have a significant negative impact on the value of the investment. Sustainability risks can therefore lead to a significant deterioration in the financial profile, liquidity, profitability or reputation of the underlying investment. Unless sustainability risks are already taken into account in the investment valuation process, they may have a material adverse effect on the expected/estimated market price and/or liquidity of the investment and thus on the return of the fund. Sustainability risks can have a significant impact on all known risk types and contribute as a factor to the materiality of these risk types.
American Tree Farm (ATF)
American Tree Farm (ATF)
American Tree Farm is a certification developed specifically for privately managed American forest operations. The guidelines are strongly based on those of PEFC. In addition to certifying sustainable forest management, the associates of ATF assist forest owners in developing management plans and in general day-to-day operations.
Sustainable Forestry Initative (SFI)
Sustainable Forestry Initative (SFI)
The Sustainable Forestry Initiative certifies the sustainable management of forests in North America. SFI is a solution-oriented sustainability organization that aims to protect forests as habitat while safeguarding forestry and its supply chains. This is achieved over the long term through standards, data, and outreach.
Forest Stewardship Council (FSC)
Forest Stewardship Council (FSC)
FSC aims to promote environmentally sound, socially acceptable and economically viable management of the world's forests. The forest should be safeguarded as an ecosystem while ensuring the long-term use of wood. Work in the forest must be carried out safely and fairly. Forests worldwide are certified by FSC.
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