Financial investors buying up forest lands, worrying greens
November 6, 2005
Financial institutions are buying up millions of acres of forest land for development across the United States, New Zealand, and South America according to an article in The Wall Street Journal (“U.S. Timberland Gets Pricey As Big Money Seeks Shelter” by E.S. Browning). Environmental implications of the land transfer may prove significant.
Nearly $30 billion of American forest land is now under control of financial investors, a six-fold increase since 1994 says Hancock Timber Resource Group, a manager of forestry investments. Further, billions more has been invested in forests overseas as well.
Fueling the buying is the “global hunt for higher returns as investment cash floods the world from many sources: pension funds, central banks, hedge funds, oil-rich nations and corporations with surplus cash on their balance sheets,” says The Wall Street Journal. “This has created a surge in demand for ‘hard assets’ like real estate, timber and commodities — in part because cash flooding into bonds has driven down returns on them.”
The appreciation in forest land prices has been so rapid that some investors are beginning to fear that a bubble could be forming — especially given falling prices of forest products.
Nonetheless, environmentalists may become increasingly concerned over the change in ownership from paper companies to financial firms. While paper companies do log forests lands, they tend to do so only periodically and generally don’t close off access to hikers and wildlife. Meanwhile, financial investors, as landowners, will likely seek returns not only from wood but also land development, selling forest land to real estate developers and timber operators. Should land prices begin to tumble, the pressure to develop and harvest these lands will only increase.
This news item is based on an article in The Wall Street Journal.