Woodland or forest?

Ilkka Norjamäki Associate Director, Head of Agri and Forestry portfolio ilkka.norjamaki@finnfund.fi

Monoculture and plantation are terms that often are used when it comes to planting commercial forests. Indeed, planted forests are typically such of one or more species whose main purpose is to efficiently produce the raw material needed by the forest industry. Criticism towards planted forests is often related to issues of poor biodiversity, water management or land use. Why do we then plant forests? What kind of a role do they play in maintaining biodiversity?

Finnfund has invested in four forest companies in Africa, as well as two funds, which aim to increase the area of planted forests and develop the plantation industry. In Africa, the share of planted forests is negligible, 2.5% of that of natural forests. In Tanzania, for example, the amount of natural forests is 46 million hectares, while planted forests cover only 290,000 hectares. At the same time, 370,000 hectares of natural forest are lost each year, which is more than the area of plantations in the country.

Planted forests behind the economic growth

Sustainably managed plantation forests, when planted in the right place, can help preserve biodiversity while the wood-based industry generates economic growth and benefits local communities.

Thomas Selänniemi, Head of Sustainability Consulting at Indufor, says: “Planting forests provides the base for Tanzania’s economic development while the growing wood industry creates more jobs. In Tanzania, the estimated annual use of construction timber is between 300,000 and 500,000 cubic meters, almost all of which comes from planted forests. The Tanzanian government’s ambitious rural electrification plans rely on the availability of utility poles from planted forests. The raw material for the growing plywood industry is eucalyptus and pine trees from planted forests. A significant proportion (approximately 60-80%) of the plantation forests is privately owned and is specifically owned by small farmers. Indeed, income from the sale of wood and employment opportunities upstream of the wood value chain will become increasingly important for the economic development of the rural areas.”

Reduced need to harvest natural forests

Woodland is no substitute for natural, native forests, but building materials, biofuels and other commodities from plantations can reduce the need to harvest natural forests. At the same time, sustainably developed plantations, especially those certified according to international standards (such as FSC), are obliged to protect all areas important for biodiversity. For example, companies in which Finnfund has invested in Africa have protected 10-70% of the land they manage and are committed to maintaining biodiversity values in those protected areas.

The companies have commissioned biodiversity assessments of the areas they manage, which form the basis of their corporate conservation programs. For example, Kilombero Valley Teak Company (KVTC) manages 28,000 hectares of land, of which 8,000 hectares are planted with teak and 20,000 hectares of natural woodland are protected and preserved by the company. The wildlife corridor between the Udzungwa Rainforest and the Selous Game Reserve runs across KVTC land. Similarly, the New Forests Company plantation forest in Rwanda serves as a protection zone for the Nyungwe Forest Reserve.

Climate change and planted forests

In addition to the direct economic and biodiversity benefits, planting forests has significant climate benefits. In Africa in particular, forests are planted in areas where local communities are most vulnerable to the effects of climate change. The importance of stable jobs in these areas will become increasingly important as extreme climate events become more frequent. The effects of climate change can already be seen, causing long dry seasons on one hand and storms and floods on the other, which can have a significant impact on agricultural yields. In addition to climate change adaptation, well-managed planted forests absorb significant amounts of carbon dioxide into living trees, soil and wood-based products. In planted forests, trees grow faster than in natural forests, which is why they also absorb carbon dioxide faster than natural forests.

If forests, especially planted forests, are so important for climate change mitigation and economic and social development, why not plant more forests? Simply put, there are too few countries in the world that understand the importance of forestry. Land ownership conditions in developing countries are uncertain, forest management skills are lacking, administration and legislation are uncertain, as is often taxation – it requires particular courage and risk-taking to invest in such a difficult environment.

Ilkka Norjamäki
Investment Manager