IMP Matrix Rating: C4
What: SLM Silva Ireland fund invests in forested land in Ireland. The impact is generated by implementing a “Continuous Cover Forestry” (CCF) approach, whereby - unlike conventional timber operations - trees of different ages and species are allowed to grow in the same plot (aka “stand” in forestry lingo), mimicking the biodiversity of natural forests. Trees are then harvested selectively through thinning operations, rather than razing the whole area down. Therefore, biodiversity is greatly improved, increasing the natural regeneration of the forest and its ability to act as a carbon sink. Financially, while yearly costs for maintenance are about 10-15% higher than conventional forestry, risks from windthrow, fire, and disease are also mitigated; moreover, investors can ride out economic cycles more easily rather than having to harvest all the wood at pre-defined times, which might coincide with a recession and lower timber sales prices. Lastly, CCF offers the opportunity to enhance financial returns through the sale of ecosystems services such as CO2 credits, biodiversity, etc.
Who: Irish forests and their stakeholders such as farmers, forestry operators, and government regulators who are looking at CCF as a more sustainable and regenerative alternative to conventional forestry. The fund is accompanied by a grant component from the European Investment Bank to train local foresters on CCF.
How Much Impact: About 30,000 hectares of Irish forests, sinking about 10 to 20 tons of CO2 per year per hectare, and managed in a biodiversity-friendly way.
Our Contribution: We were the second private investor early on in the fund, supplementing some institutional commitments and helping to unlock more funding in conditional commitments. We therefore provided much-needed undersupplied capital to facilitate the conversion of such forests to CCF.
Impact Risk: The main risk is that due to the smaller than expected size of the fund, which did not achieve its fundraising target, the manager won’t be able to sell on the full aggregation of land to one buyer committed to CCF for the next 40-60 years to complete the full transition, and the land might be converted back to traditional forestry if the government does not implement further regulation to incentivize the practice. Another risk is that there is not enough development of markets for payment for ecosystem services such as carbon credits and biodiversity credits, which would give the impacts that the fund is creating less visibility and recognition to support spillover learnings.
Sample Investment: Watch this VIDEO for a bird’s eye drone view of the forests the fund owns and is transitioning to continuous cover regenerative forest.