Biomass-based materials offer opportunities for sustainable forestry investors

An increase in the use of more environmentally sound biomass-based materials can drive demand for forestry, but investors need to be careful the supply chain their wood enters is sustainable.

Wood pulp-based rayon is increasingly found in fabrics as demand for clothing surges, but is also used in sausage casings, industrial rubber and even materials designed for aerospace. New Forests associate director MaryKate Bullen told Agri Investor that they sell wood chips to a major Chinese company sustainably involved in dissolving pulp for fabrics and xylitol manufacturing. She also said that some Australian firms are looking at establishing plants to make cross laminated timber materials for housing. Timber building materials are almost entirely imported from Europe.

Timber products are also ending up in biofuels, and governments like the US are offering financial rewards for houses built from sustainably-sourced wood.

However, charities like Canopy Planet, a non-profit working with major clothing producers like Zara, H&M and Stella McCartney to ensure clothing brands source rayon from sustainable forests, have warned investors should take a close look at the supply chain, particularly when it comes to rayon.

Canopy Planet’s chief executive Nicole Rycroft told Agri Investor that many factories making rayon mix sustainably sourced material with rayon made from illegally felled or non-sustainable timber products. Unlike paper, which can be Forestry Stewardship Certification-approved, there is no internationally recognised label for clothes produced with sustainable rayon. Rayon production, which currently accounts for about 120 million trees felled annually, and will double that figure in the next decade, involved a complex supply chain and can also involve heavy chemical pollutants. She said investing in forestry in emerging markets could make these issues even more pressing for investors.

“It is an exciting time in the forestry supply chain in that there is a real pivot happening in the market place,” she said. “Because of climate change and environmental awareness, customers and brands are now looking at this more actively, looking to use supply chains that mix in wood alternatives like straw to relieve pressure on forestry.”

Ensuring sustainable uses for wood products is something investors are having to become aware of, as general partners agree contracts for where their wood will end up. For example, Aquila Capital’s exclusive customer for its timber assets in Finland is UPM, which processes and uses the timber sustainably.

The company operates a bio-refinery in Lappeenranta, Finland, and runs production operations in 13 countries, according to its website. As well as biofuels, it produces sustainable drop-in analogues to fossil-based chemicals, which can replace fossil-based raw materials used in industrial and everyday products.

Rycroft added as institutions like hers increase oversight on supply chains, investors should be aware of the risks posed by allowing wood products to end up in environmentally unfriendly factories. She also encouraged investors to contact non-profits looking at forestry and supply chains to help ensure the route their wood products take is sustainable.