The document discusses the state of forestry in the Asia-Pacific region, focusing on timber certification, forest cover changes, and the links between sustainable forest management and various socio-economic factors. It highlights critical drivers of change, including demographics, economics, agriculture, infrastructure, politics, and societal concerns, emphasizing the need for improved governance and stakeholder participation. Additionally, it outlines initiatives like the EU FLEGT action plan and various certification efforts aimed at promoting sustainable forest practices in the region.

1. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
1

2. Timber Certification and the Role
of ITTO
Emmanuel ZE MEKA, Executive Director
International Tropical Timber Organisation
2

3. PEFC Week, Kuala Lumpur,
November 2013
State of forestry in the
Asia-Pacific Region
Bruno Cammaert
FAO Regional Office for Asia and the Pacific
Bangkok

4. Structure of the presentation
 Forest cover change
 Forest products
 Forest use and tenure
 Drivers of change
 Progress towards SFM

5. Forests of Asia and the Pacific - 2010
26%
OF TOTAL LAND AREA
740,000,000 ha
But only 0.2 ha
per person

6. Forest area by sub-region – 2010
(million ha)
255
80
214
191

7. Area (million hectares).
Forest Area Change 1990-2010
800
700
600
1990
2000
2010
500
400
300
200
100
0
East Asia
South
Asia
Southeast
Asia
Oceania
Asia and
the Pacific

8. Primary forests
19% OF ASIA-PACIFIC FORESTS
30% OF SOUTH EAST ASIA’S FORESTS
34% OF THE WORLD’S FORESTS

9. Other naturally regenerated forests
65% OF ASIA-PACIFIC FORESTS
63% OF SOUTHEAST ASIA’S FOREST
60% OF THE WORLD’S FORESTS

10. Planted forests
16% OF ASIA-PACIFIC FORESTS
7% OF SOUTHEAST ASIA’S FORESTS
7% OF THE WORLD’S FORESTS

11. Wood products – industrial round wood
ASIA
OCEANIA

12. Wood products – sawn wood, panels, and
paper

13. Wood products – key trends

Significant decline in wood
production in some countries

Exhaustion of forest resources

Concerns about environmental
protection
Regional focus
focus
International
Round wood exports
added exports

Value-
Emergence as a major
producer/exporter of wooden
furniture

14. Forest Tenure
Forest ownership in Asia-Pacific
Private
sector
4%
Owned or
designated
for use by
communities
28%
Owned or
administered
by
governments
68%

15. Forest Use
 32% primarily for the
production of wood
and NWFPs
 20% multiple-use
management
 14% Conservation of
biodiversity

16. Key drivers of change
What happens to forests and forestry is
determined to a large extent by what
happens outside the forestry sector and
by larger societal changes.

17. Key drivers of change: Demographics
 Asia-Pacific – world’s most
densely populated region
 Population increase
3.6 billion (2005)
4.2 billion (2020)
 Greatest increases in
densely populated
“developing” countries
 Urban population
38% people in urban areas (2005)
47% people in urban areas (2020)

18. Key drivers of change: Economics
 High growth rates increasing the
demand for food, fiber and fuel
 Poverty rates will decline, but the
number of poor will remain high
 Recent reductions, export orientated
countries hit hardest (e.g., Cambodia,
Malaysia, Thailand)
 Swelling middle class
 Structural changes:
• Declining importance of agriculture in
income and employment
• Globalization
• Diminishing importance of the role of
governments

19. Key drivers of change: Agriculture
 Agricultural expansion is the
primary reason for forest
conversion in many countries
 A few agricultural crops
account for a large
proportion of deforestation
 Rubber plantations are
expanding in forest areas
 Oil palm plantations set to
spread significantly

20. Key drivers of change: Infrastructure
 Road network expansion
greatest in more
developed countries
 Impacts greatest in less
developed countries

21. Key drivers of change: Politics and
policies
 Greater democracy and political accountability
 Transparency in functioning and accountability
of public institutions and officials – rights to
information
 Forest governance under increased public
scrutiny
 Demands for participation in public policy
decision making
 Shift from timber-focused management to
multiple-use management
 Greater emphasis on ecosystem services and
sustainable development
 Potential contributions of forestry to “green
economy”

22. Key drivers of change: Societal and
Environmental concerns
 Local and national issues and
actions
 Global and regional
environmental
drivers:
International
commitments
and the outcomes of climate
change negotiations
Pressure from stakeholders
in the “global forest resource”

23. Progress toward Sustainable Forest
Management
 Improved stakeholder participation and




local forest tenure mainstreamed into
National Forest Programmes
Sustained efforts in
REDD+ readiness
FLEGT: demand and supply
Third party certification of
legality, SFM and
Chain-of-Custody
Payments for ecosystem services (PES)

24. Thank you

25. Snapshot of Forest Certification
in the Asia region
Ben Gunneberg, Secretary General
PEFC Council
25

26. Forest Certification Globally
•
•
26
•
10% of the world forests are certified (UNECE/FAO 2013)
28% of industrial roundwood production is certified
60% of total certified area is PEFC

27. Forest Certification in Asia
• 2% of forests in Asia are certified (UNECE/FAO 2013)
• 8% of forests in Southeast Asia are certified (WB/Profor 2012)
• 11% of production forests in Southeast Asia are certified
27 (WB/Profor
2012)

28. National progress in Asia
28
Source: 2013, Certification system’s published data

29. Markets – Chain of Custody
•
Total of 7768 CoC certificates in Asia
29
Source: 2013, Certification system’s published data

30. Reasons for optimism?

Legality & Governance issues being addresses at the highest
levels

FSC actively promoting certification in many countries
throughout the region – results are evident

PEFC working to scale up its Asia Promotions Initiative and
expand our presence in the region

Number of national certification organizations emerging with the
potential to achieve wider uptake in forests & markets

Companies continuing to make commitments to sourcing
sustainable products – driving up demand signals

30
WBCSD Declaration, Consumer Goods Forum, Unilever, etc

31. THANK YOU
PEFC International
10 Route de l’Aéroport, 1215 Geneva, Switzerland
www.pefc.org
info@pefc.org
31

32. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
32

33. PEFC Stakeholder Dialogue 2013
The EU FLEGT Action Plan –
lnfluencing Forest Industry
Transformation
EFI FLEGT Facility
Asia Regional Office
Kuala Lumpur, Malaysia
14 November 2013
33

34. EU FLEGT Action Plan – 2003
Objective:
Address the driving forces of illegal logging both on the
demand side as well as in the timber producing
countries.
Course of Action/Main Instruments
Public Procurement Policies (demand)
Voluntary Partnership Agreements (supply)
EU Timber Regulation (demand and supply )
34

35. FLEGT Global Historical perspective
G8
Forestry
Action
Program
-1998IL as 1 of
5 areas
of action
East Asia
FLEG
Bali
Africa
FLEG
Yaoundé
FLEGT
EU Action
Plan
Europe &
North Asia
FLEG
St Petersburg
FLEGT
regulation
Regional FLEG ministerial
meetings
EU FLEGT AP
FLEGT
implementing
regulation
EU Timber
regulation
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
US Lacey Act
amendment
35
Australian
Illegal Logging
Prohibition Act

36. What is a Voluntary Partnership Agreement?
Legally-binding bilateral treaty (not “voluntary” once
agreed)
Timber-producing countries agree to licence their
timber exports as legal
EU agrees to accept only licensed imports
Backed by EU trade legislation (2005 FLEGT
Regulation)
Legality assured through an agreed Timber Legality
Assurance System (TLAS)
Supported where necessary with development
cooperation
36

37. 37

38. 38

39. EU Timber Regulation
What products are covered?
1
Covered (almost all):
•
•
•
•
Solid wood products
Flooring
Plywood
Pulp and paper
2 Not covered:
•
•
•
•
Recycled products
Musical instruments
Printed matter including
magazines, newspapers and books
Some special products, like wooden
toys
Most timber products are covered. The products covered may change in future.
39

40. 40

41. How do businesses comply with the EU Timber
Regulation?
Full implementation of VPA : Producing country’s timber
accompanied by FLEGT-license which attests to its legality.
•
Private sector initiatives :Timber certified under the main
forest certification schemes is still subject to due diligence
requirements.
Other means of providing information on legality
41

42. 42

43. FLEGT-related discussions at ASEAN
level
43

44. Promoting specific regional exchange
to share lessons and address
challenges
44

45. 45

46. 46

47. 47

48. 48

49. 49

50. 50

51. 51

52. 52

53. Thank you
EU FLEGT Facility
Tomi Tuomasjukka
00358 50 433 9049
Tomi.tuomasjukka@efi.int
www.euflegt.efi.int
53

54. EU –China BCM
Bilateral
Cooperation
Mechanism on
FLEG signed
2009,
implementation
started in 2010
54

55. China-Africa FLEGT VPA Informationsharing Workshop, October 2013.
55

56. 56

57. Thank-you.
57

58. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
58

59. FOREST CERTIFICATION & ILO CORE LABOUR
CONVENTIONS

60. BWI – BUILDING WOOD WORKER’S INTERNATIONAL
WHO WE ARE
The BWI (www.bwint.org) :
•
Global union Federations on Wood, Forestry,
Construction and Building Material Sectors;
•
328 Free and Democratic Trade Unions around the
world, 89 of them in Asia-Pacific Region;
•
Representing more than 12 million members around the
world;
•
Number of International Framework Agreements (IFA’s):
•
Mission: to promote the development of trade unions
in our sectors throughout the world and to promote
and enforce workers rights in the context of
sustainable development.

61. Pacific Rim Forestry Network
SUPPORT GROUPS
ILO
Regional Networks
•Online
•Capacity Building
•Solidarity Actions
Japan/China
Pacific
•IP-SFM
•Legal Network
•Organising
•Unsustainable Logging
SEA
f
t o cts
en du T
m o
e
ve t Pr LEG ang g
o
M res /F Ch din
A
a
Fo VP ate Tr
n
lim rbo
C a
C
•Unsustainable logging
•Outsourcing
•FC/MNC
•Organising
•Gov’t Agreement
South Asia
•Unsustainable logging
•Self-Help Groups
•Organising

62. REGIONAL INITIATIVES
WOOD IS GOOD, CERTIFIED WOOD IS THE BEST!

65. REGIONAL COOPERATION POSSIBILITIES
WOOD IS GOOD, CERTIFIED WOOD IS THE BEST!
» Pan-ASEAN Timber Certification Initiative
» Climate Change
ASEAN
ADB

66. PILOT PROJECT COOPERATION ON MYANMAR FOREST
CERTIFICATION
CERTIFICATION: WHY IS IT IMPORTANT?
Certification:
• Ensures legality of the woods and
products;
• Secures a higher priced, highly sought
after timber;
• Adds value to the wood products:
Myanmar Timber is $500 per ton vs.
Malaysian Timber is $20,000 per ton;
• Enables unions to organise and promote
decent work.

67. PROPOSED PROGRAMME COOPERATION FRAMEWORK
•
Evolve the national forestry certification scheme through
tripartite mechanism process
•
Confidence and Capacity Building Measures
• Strengthening of Technical Assistance in cooperation with
MTCC and PEFC
• Tripartite workshop on promotion of Decent Work Agenda in
wood and forestry industry
• Training progarmme on ILO Core Conventions
• Joint training for auditors
• Exchange programme
•
Trade Union Development

68. FOREST CERTIFICATION & ILO CORE LABOUR CONVENTIONS
CERTIFICATION: WHY IS IT IMPORTANT?

69. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
69

70. Responsible Asia Forestry and Trade
A partnership for strengthening capacity and sharing knowledge
Chen Hin Keong, Forest Trade Programme Leader, TRAFFIC
Andrew Ingles, Chief Technical Adviser, TNC
November 2013

71. RAFT (2012-2015)
Provide capacity building & knowledge sharing services
to promote trade in responsibly harvested &
manufactured wood products
•More verified legal products traded
•More forests independently certified sustainably managed. RAFT
recognizes the Forest Stewardship Council (FSC) certification
scheme as the current premium standard
•Reduced CO2 emissions from land-use change & forestry

72. RAFT Partners
Institute for Global Environmental Strategies (IGES)
•
•
•
•
Analytical inputs on timber legality and sustainable forest management
certification
Conducted a RAFT study on the potential role of Customs Authorities
Produced the first draft of the ASEAN chain of custody guidelines for timber
Undertaking a comprehensive review of timber legality issues in PNG
TFT (The Forest Trust)
•
•
•
RAFT work in Indonesia, Vietnam, Lao PDR & China
Develops industry guidance documents for producers, processors &
exporters on how to meet legality requirements
Provides in-person practical training to:
• improve the level of legality compliance
• make progress towards credible certification standards in the factory &
forest

73. RAFT Partners
• Tropical Forest Foundation (TFF)
•
•
•
•
RAFT work in Indonesia & Papua New Guinea
RIL training for forest concessions & training organisations
Facilitates legality & chain-of-custody audits & related trainings for forest
industries and concessions
Provides certification support in technical & management matters
TRAFFIC, the Wildlife Trade Monitoring Network
•
•
•
RAFT work in China, Indonesia, Lao PDR, Myanmar, and Viet Nam
Contributes to awareness raising of forest managers & processors about:
• specific steps to ensure compliance with relevant forestry legislation
• where operators can find additional resources & assistance
Provides support & capacity building for selected companies & industry
associations on legality standards & verification systems

74. RAFT Partners
WWF Global Forest & Trade Network (GFTN)
•
Alongside TRAFFIC, developing practical guidance for establishing legality
verification systems including:
•
updating GFTN’s “Guide to Legal and Responsible Sourcing and
Exporting in a Shifting Legal Landscape”
•
raising awareness and understanding of legality issues
•
Providing technical assistance to selected tree growers, companies, industry
associations & training institutions regarding legal compliance
•
Providing support to forest management companies for mainstreaming
legal & responsible forest management using GFTN’s existing model, tools
and learning

75. RAFT Partners
The Nature Conservancy (TNC)
•
Provides strategic coordination for the RAFT Partnership as a whole
•
Implements activities at the regional level and in China, Indonesia & PNG
•
Supports policy and systems development governing land management &
spatial planning
•
Provides technical support to national timber legality verification systems
in China and Indonesia
•
Pioneering logging practices that reduce carbon emissions
•
Helping roll out community-based natural resource management in PNG

76. .
RAFT Support:
•Some financial support for selected buyer-supplier dialogues
& international knowledge sharing events
•Mostly provides technical assistance to governments, forest
managers, wood processors, & buyers of wood products
through its implementing partners

77. www.responsibleasia.org

78. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
78

79. RECOFTC’s Regional Experiences
with Forest Smallholders
Martin Greijmans
14 November 2013
PEFC Stakeholder Dialogue, Kuala Lumpur

80. Brief Organizational Background
•Mission: Local communities and indigenous people are
actively engaged in sustainable management of forest
landscapes
•Vision: Capacity development for optimum social,
economic, and environmental benefits
•Engages with various stakeholders, including
governments, NGOs, private sector and local communities
•Since its foundation in 1987, has trained over 25,000
people from more than 27 countries

81. 3 Guiding Principles
Strong and
secure rights
Good
governance
Fair benefits
Securing
Community
Forestry
Enhancing
Livelihoods
and Markets
People,
Forests, and
Climate Change
Transforming
Forest
Conflicts

82. RECOFTC’s Functional Approach
Capacity Development Cycle
Training and
learning
networks
Piloting and
demonstrating
RECOFTC
Knowledge
Hub
Strategic
communication
Research,
analysis and
synthesis

83. Forest Smallholders
More than 450 million people
depend on forests in Asia and the
Pacific, earning an income of 20%
Forest-based community enterprises
account for 13-70% of all forestry
enterprises

84. ForInfo Project
Teak Collateral
Background:
• Teak harvested prematurely for
immediate cash needs
• Lack of economic and silvicultural
consideration
Issuing Teak Management Certificates:
• Tree valuation data, Farmer identity,
Plot location
• Information for future planning:
thinning plans and thinning products
84

85. ForInfo Project
Teak Collateral
Outcomes:
• Smallholders secure clearer tenure rights
• Longer rotation of teak cultivation, mature trees
more valuable
• Used as collateral for microfinance loans
• Certification provides stand and financial valuation
• Improve negotiating power of smallholders
Securing user rights and creating access to microfinance
for smallholder teak plantations

86. FSC Training of Trainers Asia
Aim:
• Develop pool of local
trainers to support and
respond to specific needs
of smallholders in
achieving FSC certification
• More clearly link
certification to livelihoods,
value chains, business
models, and enhanced
market linkages

87. FSC, PEFC, REDD, FLEGT may exacerbate
regulations for communities & smallholders
Different scale of regulatory barriers according to forest type and tenure
arrangement
The number of
regulations increase
along the continuum
from plantations to
natural forests, while for
income per hectare is
the opposite (i.e. higher
for plantations than for
natural forests)
November 22, 2013
87

88. RAFT and Conflict Transformation
• Promote social justice in
SFM practices
• In part by reducing incidence
and negative impact of
natural resource conflict

89. RAFT and Conflict Transformation
Approach with RECOFTC:
Training of Trainers in Conflict
Transformation
•Build confidence, skills, and
connections of practitioners
working with timber industry
•Promoting collaborative
management and conflict
resolution helping producers
attain certification
•Promoting HCVF as a standard

90. FLEGT & RECOFTC Thailand
• In Thailand FLEGT allows for renewed claim
for communities to play a role and become a
respected actor in the timber sector
• RECOFTC is raising awareness of the CF
Networks and CSOs about VPA process
– Enabling them to participate actively future
government-led consultations

91. What’s Next?
• Beyond the forest:
– Broad landscape approach
– Link with agriculture and energy policies
• Improve capacity of small entrepreneurs
– Business planning & development skills
– Links to markets, finance, policy processes
• Ex: Rights and Resources Initiative (RRI) collaboration,
• Ongoing efforts to engage communities and improve role in
forest sector
– RECOFTC brokering PPP processes: collaboration with private
sector with increased understanding, mutual gain
– Ex: Stora Enso

92. Asia
Forest Connect Asia
• Support smallholder enterprises
to connect to each other, policies
and markets
• FCA to build enterprise capacity,
facilitating and broker linkages,
pilot and document best practices
in their specific context

93. Thank You
For further information, please contact
Martin Greijmans
martin.greijmans@recoftc.org
www.recoftc.org

94. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
94

95. Investors supporting
transformation towards
sustainability in the forestry
sector
Adam Grant
Manager, Certification and Environmental Markets
PEFC
Kuala Lumpur, Malaysia
November 2013

96. Important Note
© New Forests 2013. This publication is the property of New Forests. This material may not be reproduced or used in any form or medium
without express written permission.
The information contained in this publication is of a general nature and is intended for discussion purposes only. The information does not
constitute financial product advice or provides a recommendation to enter into any investment. This presentation has been prepared
without taking account of any person’s objectives, financial situation or needs. This is not an offer to buy or sell, nor a solicitation of an offer
to buy or sell any security or other financial instrument. Past performance is not a guide to future performance. Past performance is not a
reliable indicator of future performance. You should consider obtaining independent professional advice before making any financial
decisions. The terms set forth herein are based on information obtained from sources that New Forests believes to be reliable, but New
Forests makes no representations as to, and accepts no responsibility or liability for, the accuracy, reliability or completeness of the
information. Except insofar as liability under any statute cannot be excluded, New Forests, including all companies within the New Forests
group, and all directors, employees and consultants, do not accept any liability for any loss or damage (whether direct, indirect,
consequential or otherwise) arising from the use of this presentation.
The information contained in this publication may include financial and business projections that are based on a large number of
assumptions, any of which could prove to be significantly incorrect. New Forests notes that all projections, valuations, and statistical analyses
are subjective illustrations based on one or more among many alternative methodologies that may produce different results. Projections,
valuations, and statistical analyses included herein should not be viewed as facts, predictions or the only possible outcome. Before
considering any investment, potential investors should conduct such enquiries and investigations as the investor deems necessary and
consult with its own legal, accounting and tax advisors in order to make an independent determination of the suitability, risk and merits of
any investment.
New Forests Advisory Pty Limited (ACN 114 545 274) is the holder of AFSL No 301556. New Forests Asset Management Pty Limited (ACN 114
545 283) is registered with the Australian Securities and Investments Commission and is an Authorised Representative of New Forests
Advisory Pty Limited (ACN 114 545 274, AFSL 301556). New Forests Inc. has filed as an exempt reporting adviser with the Securities and
Exchange Commission.
Slide 96

97. Overview of New Forests
 Founded in 2005
 Managing forestry investment for
institutional investment clients
 Currently managing nearly US$2 billion in
assets in the Asia-Pacific region
 Head office in Sydney; 38 employees in
Australia, New Zealand, Singapore, and
San Francisco
 Managing over 420,000 hectares of land
and forestry assets across the Asia-Pacific
region and United States
 New Forests has generated excellent
returns to our clients over 8 years, and has
aimed to operate as a leading sustainable
and responsible investor in the forestry
sector
Slide 97

98. What Differentiates New Forests?
Strategically, New Forests is…
1. Focused on Asia Pacific opportunities

Unique for a TIMO—headquartered in Sydney with an office in Singapore
 Largest forestland owner in Australia and active in markets throughout
Australia, New Zealand, and Asia

Providing investors with exposure to the integrated Asia Pacific regional
timber trade–extensive experience in domestic and export markets
1. A leader in sustainable forest management
 Investment team experienced in sustainable forest management and
environmental markets; company-wide Social and Environmental
Management System

Member of Forest Stewardship Council (FSC) International and FSC
Australia

Signatory to United Nations Principles for Responsible Investment (PRI)
3. Forward Thinking

Engaged with international NGOs, and participating in global initiatives
including World Economic Forum Global Council, Aspen Institute, etc.
Slide 98

99. New Forests’ Business
Back Office, Administration, Risk and Compliance Systems and Governance
Financial and Forest Resource Modeling Services
Sustainability and Responsible Investment
Investor Services
Slide 99

100. Tropical Asia Forest Fund - TAFF
TAFF is a commingled fund investing in tropical timber plantations in South
East Asia with US$171 million in commitments. Clients include pension
funds and development banks.
Forestry in Asia is changing:
Originated from logging concessions in natural forests
Low cost of timber from these concessions meant attractive returns were possible without
operating efficiently or sustainably
Natural forest timber has been largely depleted
Global concern over rainforest logging and a demand for certification and sustainable forest
management models are on the rise
Fast-growing, high-quality managed timber plantation estates are emerging as the basis for the
future of the industry, which will require significant capital
TAFF will:
Invest in existing forestry enterprises or assets
Upgrade and expand those businesses
Help Implement modern forestry systems and practices
Obtain certification and where possible, access environmental markets
Exit after 10-15 years of investment
Slide 100

101. The Changing Forestry Landscape
1. Shift to plantations and the
declining economic frontier of
natural forests
2. Global timber demand
growing and restructuring to
accommodate Asian demand
growth
3. Shifts in Pulp & Paper markets
and increasing demand for
bio-energy, bio-fuels, and
other bio-products
4. Rising institutional ownership
of high productivity timber
plantations
5. Sustainability imperatives and
the pricing of ecosystem
services
Three-year old Teak Plantation – Solomon Islands
Slide 101

102. Natural Forest Harvest in SE Asia in Decline
Steady Decline in Natural Forest Logging in Malaysia and Indonesia
Slide 102
Sources: Malaysia Timber Council and personal communication with Yayasan Sabah; ITTO; Indonesian Forestry Department Annual Report, 2008.

103. Limited Plantation Investment
Asia has lagged behind other
regions in the development of
commercial plantations for higher
value end uses. Significant
plantation areas in Indonesia,
South China (approximately 6.0
million hectares) and Vietnam are
being grown on short rotations
for chip/pulpwood only.
Both China and Vietnam currently
import plantation hardwoods
from South America, North
America, Europe and Africa
primarily to fulfill demand for
certified timber. There are
significant cost advantages to
regional sourcing.
Source: New Forests Asia estimates based upon RISI 2011 Pulp and Chip wood Conference, ITTO 2005
Sustainable Forestry Management Report, and government data sets. Data does not include rubber estates and
is based on private/government commercial scale plantations not small holders (except for Thailand where small
scale private growers are fundamental to the industry)
Slide 103

104. Opportunities for TAFF
4-year old clonal teak in Java
Slide 104
 Investing in Southeast Asia with
priority for Indonesia, Malaysia,
and Vietnam
 Attractive growing conditions,
low costs, and close access to
growing markets
 Investment team in financial hub
of Singapore
 Combination of existing and
“greenfield” plantations
 Environmental, Social &
Governance (ESG) factors and
environmental markets offer
value-add opportunities

105. Sustainability as a “Stay in Business” Issue
 Institutional Investors require
sustainability policy, labour
policy, corruption and bribery
standards, use of certification,
and monitoring of performance
standards
 Major consumer groups are
increasingly demanding
certification or product chain of
custody documentation
 Governments are under
pressure to create business
environment that will
encourage investment and
support competitiveness of
local industry
Slide 105

106. Sustainability at New Forests
New Forests is a signatory to the UN
Principles for Responsible Investment
(PRI) and commits to integrating
Environment, Society, and Governance
(ESG) principles into investment decision
making
ESG policies are implemented at the fund
level through a Social & Environmental
Management System (SEMS) with internal
auditing
The SEMS defines third-party certification
and responsible management
requirements relevant to the asset class
and type of investment
Sustainability reporting is integrated into
funds reporting structure and New Forests
publishes an annual Sustainability Report
covering responsible investment activities,
targets, and progress
Slide 106
Sustainability Reporting

107. TAFF Sustainability Goals
New Forests is committed to sustainable management of TAFF investments
 Environmental, social and governance best practice will ensure TAFF
contributes to:




Reduced greenhouse gas emissions and other forms of pollution
Maintenance or enhancement of high conservation value forests and biodiversity
Improvements in local livelihoods and safe working conditions
Recognition of indigenous rights
 Third-party verified sustainable forest management will add significant value:








Slide 107
Price premiums and better market access for certain products
Lower project and political risk through reduced social conflicts
Improved asset liquidity and lower risk-adjusted discount rates on exit
Lower cost of debt capital and better debt access, especially from development banks
Improved access to licences, operating permits or additional assets from host countries
Reputational risk reduction for fund investors
Opportunities for increasing operating efficiencies through better management
Opportunities for environmental market products from areas set aside from production

108. Opportunity Costs in the Landscape
Markets set prices for timber products, but how do we value other
benefits?
 Forests provide not only timber, but a myriad of other benefits related to
freshwater, carbon cycling, biodiversity conservation, human health, and well
being
 These ecosystem services have not been priced and therefore are used
wastefully and disregarded in land conversion decisions
 Leads to plantation and agribusiness industry using more land rather than
increasing productivity per hectare
 Policy in conflict with overwhelming economic fundamentals is difficult to
enforce on a sustainable basis
Slide 108

109. Innovating Markets
New Forests established Malua
BioBank in 2008 with seed
investment from The Eco
Products Fund.
Unlocking Demand for Biodiversity
-Roundtable on Sustainable Palm Oil (RSPO)
compensation mechanism for past HCV clearance
-Forest Stewardship Council (FSC) compensation
mechanism for past “downwards conversion”
Further Investment Potential
-Carbon value through proven methodology
-Impact or CSR investment to catalyze biodiversity market
growth and establish sustainable brand value
Slide 109
The project creates an
alternative economic value for
Borneo’s rainforests and offers
sustainability solutions for oil
palm supply chain.

110. Environmental Markets Lessons Learned
 Price signals work




SO2 market drove changes in fuel from high to low sulphur coal
EU Emissions Trading Scheme (ETS) drove $ billions into carbon funds and carbon
companies
Australian water market restructured agriculture to increased efficiency and more
valuable cropping
US Mitigation Banking is a $billion+ turnover industry
 The finance and investment sector can facilitate change


Investment funds sprang up related to the EU ETS, Australian Water market, and
Mitigation banking industry—creates liquidity to meet market needs
Markets create transparency in pricing; futures and options create stability; water
rights as collateral for investment in water use efficiency
 Stability is necessary, but fine-tuning is also necessary


Meddling by Government killed the SO2 markets
Excessive allocations and unexpectedly huge offset supply have made the EU ETS
unstable
 It needs to cost more to remain outside rather than inside a scheme


Slide 110
Lack of price premium has hampered most voluntary certification schemes
REDD has struggled to have impact because private sector is disengaged and
continues to operate on a business as usual basis

111. Towards the Future
Can forestry represent a “natural infrastructure” asset class?

Projections are that global industrial roundwood demand will begin to plateau around 2.3-2.5
billion m3 per annum in 2030.

100 to 150 million hectares of commercial plantation area (2.5-3.75% of world forest cover)
could supply most of this timber, while timber production from frontier regions (Canada,
Russia, tropical natural forests) will stabilize or decline. Biomass demand may double this.


Slide 111
Large scale ‘deals’ like NZ, Australia,
Indonesia-Norway, Boreal Canada,
etc.

Canopy view of New Forests’ Malua Biobank in Sabah, Malaysia.
Mechanisms to price ecosystems via
REDD, BioBanking, watershed
protection, etc. alongside
commercial timber plantations could
produce the basis for the
stabilization of conservation and
production functions
Ultimately this must be driven by
private capital and investment

112. Key Points & Conclusions






Slide 112
World timber demand will continue to rise, markets will evolve to
encompass Asian demand growth
Supply increases will primarily come from timber plantations, rather
than further expansion of the economic margin in primary forests
Increases in plantation area are more difficult to achieve than increases
in productivity of existing plantation base—land competition will also
rise among food, energy, and fibre crops
Institutional portfolios have gone from 5% real assets in 2000 to 15%
real assets today, and likely will reach 25-30% by 2025—huge inflow of
capital for real estate, infrastructure, agriculture, forestry, etc.
Need fopr a financing source for conservation as well as production—
this could include REDD+, biobanking, water rights, no net loss supply
chains, etc.
Social and community integration via benefit sharing, consultation, and
governance models, and respect for traditional and legal rights will be
core to sustainable outcomes

113. www.newforests.com.au

114. Appendices

115. New Forests’ History

July 2005 – Company established in Sydney and
receives Australian Financial Service Licence

May 2007 – Establishes US office

August 2008 – Establishes SE Asian office

October 2009 – Begins Funds Management Business

August 2010 – Closes the AU$490 million Australia New
Zealand Forest Fund


2011-2012 – Acquires major softwood plantations and
softwood sawmills in Australia

June 2013 – Final close of the New Forests Tropical Asia
Forest Fund, now with commitments of US$171 million,
and first close of the New Forests Australia New
Zealand Forest Fund 2 with AU$570 in commitments

Slide 115
January 2011 – Closes AU$415 million acquisition of
270,000 hectares of Australian forest land from the
Receivers of Great Southern Plantations
June 2013 Makes first Asian investment, acquiring
Hijauan Benkoka plantations in Sabah

116. Supply from Russia is Declining
Russian softwood exports have hit a wall…
Russian log exports have
fallen dramatically over
the past six years while
lumber exports have been
flat to slightly increasing.
Slide 116
Source: FAOstat

117. Canadian Supply Falling
Policy Constraints and Mountain Pine Beetle impact will lead to near-term
decline in timber supply, leveling off in the medium to long term.
Slide 117
Source: Mark Kennedy, CIBC. “Global Perspectives on Forest Products Trade.” Presentation to Future Forestry Finance 2012.

118. Natural Forest Logging Collapse (repeated
from main preso)
Regional Collapse in Natural Forest Logging in Malaysia and Indonesia
Slide 118
Sources: Malaysia Timber Council and personal communication with Yayasan Sabah. / Indonesian Forestry Department Annual Report, 2008.

119. Australian Plantation Harvest Rising
Australian hardwood plantations are steadily replacing
a declining supply from native forests
Slide 119
Source: ABARES, Forest and Wood Product Statistics.

120. Increasing Importance of Plantations
 Global industrial roundwood
demand is likely to rise from 1.5
billion m3 in 2013 to 2.5 billion m3
by 2050
 Somewhat speculative forecasts
suggest biomass energy, biofuels
and biomaterials demand could
dwarf industrial roundwood
demand over next 30 years*
 Almost all incremental supply
will come from timber
plantations—both productivity
enhancement and plantation
area will need to increase
 Investment needed could range
between $100 and $500 billion
to meet these levels of demand
*WWF, 2013 Living Planet Report
Slide 120
Source: FAO, 2010. Global Forest Resource Assessment.

121. Plantation Productivity Can Increase
Example of Productivity Gains –
Softwood in Australia
*Source: Timberlands Pacific Pty Ltd
Slide 121
 If industrial wood demand
grows at an equivalent
rate to global GDP can we
meet much of this via
productivity enhancement
rather than land base
expansion
 Investor strategies focus
on silviculture, nutrition,
risk management and
genetics to increase
productivity by 50-100%
over the next 50 years

122. What Government Policies are Needed?
A modern forest policy framework needs to address wood
supply, forest conservation and sustainability issues
 Future wood supply growth will largely be delivered by
plantations—this will be from existing plantations managed
more intensively and expansion of plantation area—
expansion is a key policy challenge
 As timber plantations take on increasing share of wood
supply, innovation is needed in financial mechanisms for
forest conservation—REDD, biobanks, supply chain initiatives
 Social outcomes need to balance multiple stakeholders and
conflicting interests and rights. Innovations around
consultation/governance models, sharing in economic
benefits, community benefits are needed
Slide 122

123. TAFF Certification & Sustainability
New Forests is committed to sustainable management of TAFF investments
 Third-party verified sustainable forest management will add significant value:








Price premiums and better market access for certain products
Lower project and political risk through reduced social conflicts
Improved asset liquidity and lower risk-adjusted discount rates on exit
Lower cost of debt capital and better debt access, especially from development banks
Improved access to licences, operating permits, or additional assets from host countries
Reputational risk reduction for fund investors
Opportunities for increasing operating efficiencies through better management
Opportunities for environmental market products from areas set aside from production
 TAFF Certification Policy:



Slide 123
Achieve compliance against IFC Performance Standards within three years of acquisition on all
assets including plantations, natural forests, and processing facilities
Achieve FSC certification on all natural forests within three years of acquisition if the asset
meets all FSC eligibility criteria
Where plantation assets do not meet all FSC eligibility criteria, engage an FSC-accredited
certification body to undertake third-party verification of compliance with all applicable FSC
requirements and, depending on market requirements, pursue additional third-party
certification against an alternative certification system depending on market demands such as
PEFC, LEI, FSC controlled wood, VLO, and/or VLC or other future standard that may be
developed

124. External Motivations
 New Forests designed its Social and Environmental Management
System (“SEMS”) in 2010 and began full implementation in 2011.
 The SEMS is designed to systematically identify, manage, and report
on social and environmental issues and potential impacts.
 The SEMS helps us win clients:



English pension fund manager said, “You’re the only manager we’ve seen
who can show how they manage assets sustainably.”
Dutch pension fund manager said, “FSC certification is absolutely required
for us as a target and your SEMS shows us how you pursue that.”
Provides a reference point and tool for due diligence
 The SEMS helps us provide client services and meet requests:


Current clients ask to see audit reports
Streamlines responses to client inquiries
 Risk management and continual improvement.
Slide 124

125. Linking Sustainable Forest
Product Supply Chains
through Asia
PEFC Stakeholder Dialogue 2013
14-15th November, Kuala Lumpur
125