Investing in UK forests could mitigate risk for your clients
Political uncertainty impacted a huge number of areas in the UK throughout the second half of 2019. Despite this, physical assets continued to show robust performance.
For example, as of 31 December 2019, all of our forests were independently valued. We are pleased to announce they have all have increased significantly in the year. This performance has not decreased even with current social and economic uncertainty.
Click the link below to find out more about our forest investment strategy and the range of benefits it can offer to both clients and advisers. These are particularly prevalent as other investment options continue to remain volatile.
Watch Video : Stellar’s Investment Sectors – Forests
Our investment strategy
Underpinned by freehold land, an investment into UK commercial forests can be a way to generate stable returns for investors.
An investment in forests as part of our Stellar Growth IHT service or Stellar Business Service should qualify for Business Relief after only two years. Forests have low volatility and are uncorrelated to other asset classes.
The steady return of this asset class is demonstrated by annual returns of almost 10% per annum over the last 25 years (Source: MSCI Forestry Index)
In addition, forests offer the opportunity to generate capital growth which is free from capital gains tax. In addition, all timber sales are free from income tax (or corporation tax in respect of businesses). This in turn makes it a proven tax-efficient asset class for both private investors and business owners.
Potential ESG benefits
In recent years, there has been a great deal of attention paid to tree planting. In particular, most of the focus has centred on its ability to help mitigate climate change.
For example, in Scotland, we currently own five forests, spanning over a combined 1,800 hectares. Within Scotland, there is a well-established grant structure that can be highly attractive for investors. This has fuelled a desire from investors to support government policy.
There is an expectation that the current grants offered by the Scottish government will not only continue. They will also help to drive policy in the remaining UK countries.
The UK forestry market has also seen the possibility arise to generate an annual income from sequestering woodland carbon. By following The Woodland Carbon Code, new woodlands can forecast the amount of carbon they will sequester. They can then either sell this ‘pending’ carbon in advance to help fund planting. Alternatively, they can register and sell it as and when it can be verified once the trees have grown.
This in turn has generated a market for trading woodland carbon. We are currently exploring how to capitalise on this market on behalf of our investors.