These 14 businesses are growing money on trees
These 14 businesses are growing money on trees
A new report from the World Resources Institute (WRI) and the Nature Conservancy (TNC) found that businesses across the technology, consumer products, project management and commercial forestry sectors are making money from planting trees, with sales growing up to 10 times per year.
"The restoration economy is at the take-off stage," wrote WRI President and CEO Andrew Steer and TNC President and CEO Mark Tercek in the report, "The Business of Planting Trees: A Growing Investment Opportunity (PDF)." The note: "New business models are emerging, technology is advancing and governments are showing political will."
Businesses such as BioCarbon Engineering, which uses specialized drone technology to reforest remote landscapes, literally are taking off, melding engineering advancements to restore age-old ecosystems; while search engine Ecosia (a B Corp) contributes its profits to plant trees.
The report profiles these and 12 other businesses successfully seeding growth opportunities in the restoration economy — including tech startups, smallholder finance and timber companies — to inspire venture capital, private equity and impact investors who know little about restoration opportunities.
The "restoration economy" is a network of businesses, investors and consumers that engage in economic activity related to restoring land — in this case either through reforestation (replanting a degraded area) to agroforestry (establishing tree-based agricultural systems). They may count among their end markets sustainable timber, livestock feed or consumer products on grocery shelves.
"The business of planting trees is going to be one of the biggest climate stories of the next 20 years," Justin Adams, managing director for global lands at TNC, told GreenBiz, likening it to the burgeoning renewables industry in the mid-'90s. "There is the opportunity to deliver value to society."
Besides serving the market, forest restoration improves water quality; produces sustainable timber, fuel and fiber; improves soil health; provides food and forest products; creates rural jobs; benefits biodiversity; improves air quality; helps mitigate climate change and creates recreational opportunities for communities.
This is essential for sustaining the human population, not just biodiversity. According to TNC, one-third of agricultural landscapes were degraded in 2010, and signs of degradation can be found in every ecosystem around the world.
Meanwhile, population growth and expanding consumer demands are pressuring natural ecosystems. The U.S. restoration economy alone generated $9.5 billion in annual economic output in 2015 and created an additional $15 billion in indirect and induced output, estimated the report, while the ecological restoration industry employed 126,000 Americans in 2014, exceeding jobs in coal mining by 59 percent.
Protecting society's canopy
Forests provide valuable co-benefits to communities and companies. For example, New Englanders may lose an area of forest nearly twice the size of Rhode Island over the next 50 years. But forests offset more than 20 percent of the region's carbon dioxide emissions and provide about $500 million in health benefits annually by removing 760,000 tons of air pollution. They also contribute to the economic engine through timber management, tourism and outdoor sports businesses.
In another illustration of how this activity can benefit communities, the practice of restoring North Carolina wetlands increased nearby home sale prices by $3,100 compared to properties with no wetlands nearby, according to Andrew Wu, a research analyst at WRI.
Nearly 5 billion acres of degraded and deforested land awaits restoration worldwide, and companies are cashing in. Last year, Apple announced an expanded sustainable forestry strategy, aimed at creating enough responsibly managed forest to offset its packaging footprint. More recently, the Mondelez snack company announced a partnership to protect Ghana forests, contributing $5 million towards practices such as implementing cocoa practices that increase yields and sustainability — a win-win.
"We’re offering investors the opportunity to earn a return from urban green spaces," stated April Mendez, co-founder of Fresh Coast Capital, which finances urban revitalization in the United States. "Private investment can accelerate cutting-edge green infrastructure that improves air quality, health and community cohesion, while providing cost-effective stormwater management for cities."
Money from trees
The WRI and TNC report targets long-term investors who make direct investments between $500,000 and $10 million in private companies, such as venture capital, private equity and impact investors; national and multilateral development banks; and grant-making organizations.
They analyzed 140 businesses against five criteria: Is it profitable? Is it scalable? Is it replicable by other regions or businesses? Is it environmentally beneficial? Is it socially beneficial?
The 14 companies profiled hail from eight countries, including the United States, Brazil and Kenya, and range from pre-revenue businesses to those with more than $50 million in sales. Some are old-growth businesses that have been around since the 1970s, and some are years-old sapling startups. Their customers range from consumers to large financial institutions.
"The business of planting trees is an opportunity for investors; it's not a conservation story on its own," said Adams. For better or worse, it's essential to prove the business case to investors, because, he said, "When a forest has value, it remains a forest. When it has no value is when developers come along."
Each business showcases that there's no time like today to invest in trees that will give back decades into the future. Technology allows faster, cheaper, more efficient land restoration; while demand for environmentally beneficial products differentiates companies in the consumer market.
BioCarbon Engineering uses drones to plant trees. Sensors aboard a fixed-wing drown observe ground topography, biodiversity and obstructions to create an optimized planting pattern. A planting drone that can cover 1 hectare in 18 minutes deployes 300 biodegradable seedpods, then monitors growth.
Brinkman and Associates manages large government projects in Canada and tropical plantations in Latin America. They offer forestry management services to land manager, land licensees and government clients. The company has planted more than a billion trees across Canada since 1970.
EcoPlanet Bamboo establishes bamboo plantations as alternative timber and fiber sources. Its aim is to provide sustainable, certified bamboo timber to global markets. EcoPlanet Bamboo operates in Central America and Southern and West Africa.
Ecosia uses ad revenue to plant trees while people search the web. The free browser extension works just like any other search engine. With more than 7 million active users, it has invested more than $7 million to plant more than 20 million trees.
F3 Life enables access to credit for smallholder farmers in Kenya. It was honored by the Global Innovation Lab for Climate Finance and won the United Nations Development Program and Mitsubishi UFJ Morgan Stanley Securities Prize for Climate Change Finance Innovation.
Fresh Coast Capital coordinates large-scale urban revitalization in U.S. cities. Comprising a team of community organizers, engineers, environmental scientists and finance professionals, the B Corporation develops projects such as green infrastructure for stormwater management.
Guayaki sells beverages made from yerba mate grown in restored Atlantic rainforest. The company was founded in 1996 to provide an alternative to coffee while restoring and protecting the South American rainforests and the communities that depend on them.
Komaza, Kenya's largest commercial tree planter, works with smallholder farmers to plant and process trees for timber. Africa's industrial wood demand will grow 500 percent in the next two decades, leading to more imports. Komaza aims to unlock the potential of sustainable small-scale wood farming.
Land Life Company, founded by an ex-Shell engineer, patented a product that enables trees to grow in dry and degraded land. Its COCOON planting technology offers a low-cost and scalable way to plant trees even in arid areas.
Lyme Timber is a private timberland investment management organization that focuses on sustainable land management. It acquires and manages working lands under working forest easements (agreements between a landowner and land trust or government that conserves land).
New Forests, founded in 2005, is a sustainable assets investment manager for forestry, land management and conservation. Specifically, it manages sustainable timber plantations and conservation investments. It also offers market insight into the maturing forestry sector.
Symbiosis Investimentos is a Brazilian privately owned investment company that transforms degraded areas into productive forests by restoring Atlantic rainforest with native species.
Tentree is a B Corporation apparel company that designs and sells shirts, pants, hats and accessories. It plants 10 trees for every piece of apparel sold with the goal of planting 1 billion trees by 2030.
TerViva plants pongamia, a non-GMO tree crop that needs little irrigation and produces biofuel, on distressed agricultural lands. Forbes featured TerViva on a list of Top 25 Most Innovative Ag-Tech Startups in 2017.
Forestry restoration is increasingly backed by governments, which may till the soil for investment opportunities.
"The opportunity to manage lands and soils to sequester carbon has the potential to deliver more than one-third of near-term solutions to climate change," said Adams.
The Paris Climate Agreement, which counts most global governments and many influential U.S. corporations as signatories, requires action to conserve and enhance natural ecosystems. The Bonn Challenge aims to restore 350 million hectares of deforested land by 2030, while Initiative 20x20 (supports the Bonn Challenge in Latin America and Caribbean) and AFR100 (supports the Bonn Challenge by restoring forests in Africa) are powerful calls for public-private partnership and a source of long-term demand for investment.