LondonAccord:Forests

This page was initiated by Matthew Clare

1. Why trees are vital to a healthy planet

• Nutrients

Tropical latosol soils have a very fragile nature. A thick layer of litter lies above a very thin layer of nutrient-rich humus, below which is a very thick horizon which is constantly being worked by detritivores such as worms. The vegetation relies on this flow of nutrients between litter, humus and horizon, which depends on the breakdown of the litter by detritivores. Furthermore, the thinness makes latosols highly prone to erosion if the vegetation and litter layers are removed. The removal of vegetation breaks the nutrient cycle, rendering the soils infertile, making the use of fertilizers indispensable. If the trees are cleared and replaced with soy crop, for example, within a few years the soil will be exhausted of nutrients and crops will fail. In many cases, even the use of fertilizers has failed to produce successful growth in latosols.

• Oxygen and uptake of CO2

Photosynthesis, which occurs in every plant cell, oxygenates the air and removes our favourite greenhouse gas, carbon dioxide. . Given the indiscriminate tree felling in many parts of the world, it would not seem illogical to assume that many people do not realise their ecological value. Photosynthesis is the process of making sugars (food) by photoautotrophs, by taking in carbon dioxide and producing oxygen and water. This is really quite handy, given that this greenhouse gas is emitted by humans and the burning of fossil fuels, numbers of which are on the up.

• Habitat for wildlife

Trees offer habitats to over half of the worlds organisms, making forests vital to biodiversity. Many species are suffering from forest clearance and land use changes. Orang-utans have felt the full force of the high levels of logging. After intensive research carried out by The Great Ape Trust, it was found that due to illegal logging and the expansion of palm oil plantations, a 14% decrease in population, over 1500 orang-utans, occurred from 2004-2009 on the island of Sumatra alone. Furthermore, it is drastically important not to wipe out forest species, as currently an entire quarter of medicine ingredients and derivatives come from the rainforest, with 70% of all anti-cancer treatments coming from merely the tropical rainforest.

2. Why forests are disappearing

• Logging

The logging industry typically provides unsustainable grounds for profit. Trees are felled to fuel supply the global timber market, but with immediate term financial rewards in mind. This is not managed silviculture, but in many cases illegal. Logging is mainly conducted due to the high levels of profit, mainly because of the lack of governmental control over forest areas, and the ever increasing demand for wood. Corruption can also play a part as to why logging is common, where attempts to sustain the rainforest are largely cast aside to gain profits. In Brazil this is very common, 4300 sq. miles was logged in 2008. Throughout Africa there is also great activity, with 270,000 m3 on average fell each year.

• Tourism

The act of being a tourist has many environmental spin-offs which are often not recognised. Whilst tourists trample land, disturb habitats and board petrol fuelled aeroplanes, these effects are nothing in comparison to the deforestation that takes place to cater for them on arrival. Huge areas of land are allocated for hotels and services, along with locals selling timber-based products and the construction of timber buildings all of which contribute to huge levels of deforestation. The growth in global population, disposable incomes and modern transportation have allowed mass tourism and thousands of people to descend on previously pristine areas such as the Gambia or Indonesia. Gambia until around 1970 had very little amounts of tourists. The limited amount consisted of rich Swedish sightseers, most of whom spent most of their time in Banjul. Last year it was recorded that just under 8.0% of Gambia’s entire GDP is generated by tourism. 11,000 Gambians are employed in the tourist industry. Tourism in Indonesia was almost un-heard of, until improved knowledge and technology helped it to generate huge numbers of tourists, reaching 5,505,759 with an average stay of 9.02 nights. Needless to say the impacts and strains on the environment are immense.

• Large-scale farming

This form of agriculture is monopolised by cattle ranching, accounting for 90% of all deforestation according to the esteemed Greenpeace report, "Slaughtering the Amazon". Nevertheless soya farming is becoming increasingly mass-scale as the Amazon is cleared to cater for the increasing demand for Brazil’s most popular cash crop. Large amounts of the Amazon are burnt to make way for cattle, resulting in yet more carbon dioxide (and methane) released into the atmosphere. . McDonald’s attempted to act upon this by trying to convince other NGO’s to ensure they do not promote any further deforestation (?). Brazil is both the largest beef and tanned leathers exporter, with a beef market size of $6.9 Billion. The Brazilian president, Luiz Inacio Lula Da Silva states ‘over $20 Billion will be raised to finance conservation and sustainable development’. There are two main reasons as to why this proposition has had limited effect. Firstly although attempts to control the levels of deforestation are being made, the forest 'resources' are not sufficiently monitored or legally. This legislative reality along with cheap land and labour is very attractive to ranches. Secondly, the Brazilian government has high levels of investment in the beef and leather trade with shares valuing $2.65 Billion between 2007 and 2009. Despite being illegally harvested, the beef and leather harvested from previously forested lands have managed to reach numerous reputable companies such as BMW, Tesco, IKEA and Adidas.

• Small scale farming

Subsistence farming has limited environmental effects, accounting for under 10% of entire deforestation. Crop rotation, slash and burn and the use of natural fertilizers have been deployed farming methods since homo sapiens sapiens evolved. To offer a simple example, each farmer would have five plots of land. He/ she would farm their first plot, and then when finished would burn the litter, as to return nutrients minerals to the soil, then move to the second plot, and so on. As succession of vegetation can take place the method is sustainable Although 50 years ago this worked and ensured sustainable farming, populations of tropically forested areas have increased dramatically. Considering the main farming continents, Asia, Africa, Latin America and the Caribbean, an increase of just below 315% from 1950-2008 occurred; rising from 1.79 billion to 5.604 billion people. Returning to the example, this would mean that rather than the farmer returning to plot 1 after 10 years (therefore allowing completed succession), he may have to after 6 years, and so the soils become less fertile and productive, and re-growth cannot occur.

3. How to increase forested areas

REDD (Reducing Emissions from Deforestation and Degradation) attempts to maintain levels of trees for numerous reasons. As suggested, a key element of their work is to ensure that carbon emissions are controlled, by advocating trees as a significant carbon sink. The Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification Schemes (PEFC) are two examples of international standards markets which are succeeding in bringing more and more timber suppliers into the realm of sustainable forestry. Both these certification bodies have rigorous monitoring of timber sources and paper products to ensure they are not harvested from protected forests or ill-managed forests.

Many companies have made an effort to highlight how considerate their company is, marketing policies such as, "when one tree is cut down, we plant three more". Although it may seem like a good, green idea, the geography of where these trees are being planted and felled is crucial in evaluating the legitimacy of this silviculture method. Taking into consideration two different types of timber, hardwood (e.g. mahogany) and softwood (e.g. pines), the latter being the less profitable yet more common, it becomes obvious that this replantation is actually not as environmentally friendly as adverts may suggest. If the area initially felled to locate a silviculture plantation was temperate forest, replaced by pines, the biodiversity and soil quality of that area is immediately lost. Furthermore, pines, which are the most common timber used for paper products, do not have the same ecological benefits provided by hardwoods or endogenous or native species such as sequoia or oak trees.

Numerous attempts have been made to engender environmental protection whilst maintaining high levels of economic growth. On the whole, these are not working as they should be, as levels of deforestation are not falling. Both governments and large businesses have tremendous influence on how much and what resources a country exports. The only way of achieving global consensus to stop cattle ranching on deforested land is to get ratification from all governments and farming bodies, which would be far from easy. The importance of trees is evident, and despite all the best efforts to reduce carbon emissions through different means, if trees are continually chopped down, carbon dioxide levels will become an even greater problem. Deforestation must be countered for humanity to ensure it still has a healthy, working planet. Let's hope that at the Copenhagen Summit this December, governments and business take decisive action on deforestation.

4. Finance & forestry

Finance and forestry are related in both direct and indirect ways. The direct investment universe comprises investing/financing forests as physical assets and as financial assets. Forest physical assets usually require long-term investments for so-called 'patient capital' but offer immediate returns (through the sale of forest-derived products such as timber). Investing in forests is deemed attractive given the low volatility of returns and the potential of forests in terms of portfolio diversification, counter-cyclicality and as long-term inflation hedges. Investing in forests as physical assets comprises however a number of risks including political (country) risk, property rights, operational risks, reputational risks and investment risks. Related financial assets are forest-related financial products/assets deriving their value from a contractual claim. Examples include Timberland Investment Management Organizations (TIMOs), Forest Real Estate Investment Trusts (REITs), corporate bonds in the forest, packaging and paper industry and forest bonds.

For more information on finance & forestry, have a look at the following:

• Finance & Forestry: Where's the Data? - link [1]

• Finance, Forestry & PEFC: How Is Forest Certification Relevant? - link [2]