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Branching out: Why investors are exploring forestry investments in Ireland

Article by Thomas Byrne, Divisional Director, Investments Department at Lisney. ( | +353 87 639 7126 )

Forestry has emerged as an alternative but compelling investment class in Ireland which offers investors financial returns but also has significant environmental and social benefits. Ireland’s landscape, climate, and strong Governmental support for forestry initiatives assist those looking to diversify their investment portfolios with sustainable assets.

Forestry has certain characteristics which make it a compelling asset as part of a mixed portfolio.

Firstly, forestry land offers long-term, stable returns compared to traditional asset classes. Timber prices tend to be less volatile and have demonstrated resilience during economic downturns, providing investors with a hedge against market fluctuations.

Secondly, investing in forestry contributes to carbon sequestration, biodiversity conservation, and soil protection. Forests play a crucial role in mitigating climate change by absorbing carbon dioxide from the atmosphere, thereby helping to combat global warming. As such, forestry assists investors hit ESG targets and aligns with the principles of sustainable investing and promoting environmental stewardship and social responsibility.

Thirdly, the Irish Government supports forestry expansion through grants, tax incentives, and subsidies. These incentives aim to encourage afforestation, sustainable forest management, and the creation of new woodland habitats. We further understand revenue from timber sales is income tax-free and there are also inheritance tax advantages and CGT exemptions for individuals.

Fourthly, forestry offers diversification benefits to investors by providing an alternative asset class with a low correlation to traditional investments thus reducing overall portfolio risk and enhancing long-term returns by spreading exposure across different sectors.

Finally, as demand for timber continues to rise, driven by population growth, urbanisation, and infrastructure development, the value of forestry land is expected to appreciate over time. Investing in well-managed forests can yield substantial capital gains, especially as timber prices increase with growing demand.

In conclusion, forestry land represents a promising investment class in Ireland, offering investors the opportunity to earn stable returns while promoting environmental sustainability. With supportive Government policies, favourable market dynamics, and growing demand for timber products, forestry investment is well-positioned to deliver both financial and non-financial benefits in the years to come.

By Kevin Kavanagh
3rd April 2024