Responsible investments in the timber sector
When undergoing a due diligence process for forest investments, the easiest way to reduce risk is to ensure that the forest in question is Forest Stewardship Council (FSC)-certified.
FSC certification guarantees that an independent party has assessed the operations against principles that deal with risks such as basic legal compliance, indigenous communities, and high conservation value forests.Many banks have provide preferential lending for forest managers or forest product companies that already have, or are in progress towards, FSC certification.
Making FSC work for youThe FSC certification scheme provides quality assurance for responsible forestry. It is regarded by WWF and other major environmental and social NGOs as currently the most credible forest certification scheme.
The downloadable document Forest Financing Risk Criteria and Corresponding FSC Principles and Criteria provides a table showing how FSC Principles and Criteria sit within the 6 risk criteria which financial investors need to consider in their due diligence.
There is a need for financial institutions to offer more innovative or sophisticated financing facilities that capture the risks and opportunities of responsible forestry, without the risk to their reputation, while stimulating the wider uptake of forest certification.
Other gains from responsible forestry for financial institutionsThere is growing recognition of the financial value of forests’ ecological services such as carbon sequestration, led by REDD (Reduced Emissions from Deforestation and Degradation) and other forest carbon projects.
This is bringing new opportunities for both investors and forestry enterprises committed to transition to responsible forest management.