Carbon markets - a focus on forestry

Whether you are looking to the carbon markets for financial returns or to source sequestration units for insetting or offsetting, productive sustainable forestry investment can bring direct access to these new and developing markets.

Gresham House approach the carbon markets with some caution due to their nascent and rapidly evolving nature, which can present some material risks. Carbon markets differ from one another in form, as well as in the broader political and market context in which they function.

In general, we favour well-established ‘compliance’ markets, such as in California, New Zealand and Australia, these markets are underpinned by political and regulatory stability. On the other hand, we take a more cautious approach to ‘voluntary’ carbon markets due to their higher associated risks. When presented with a higher-risk opportunity, we consider the potential return or offsetting capabilities from carbon as an additional enhancer, providing attractive upside to existing strong forecast forestry returns.

Given the rapidly evolving nature of carbon markets, our view and approach will evolve and change as carbon markets develop and mature.

In this paper we provide clarity on various carbon markets around the world and illustrate the current and potential role of forestry towards solving the global climate challenge.

We also give insights on the markets specific to individual countries and we draw, in particular, from our experience in the UK, Australia and New Zealand to offer our thoughts on the opportunities and challenges facing the forestry sector.

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