The financial index for the forest and timber industry
22. Feb 2022
The Zurich-based Timber Finance Initiative, a Timbagroup company, has launched the "Timber Finance Carbon Capture & Storage Index". The index focuses on the CO₂ storage effect of wood and, with 30 selected listed companies, tracks the forestry and timber industry in the USA, Canada and Europe.
The forestry and timber industry has been at the beginning of a rapid growth cycle since 2020. After years of low investment and prices, changes are now being ushered in internationally: European and North American governments are promoting timber construction, institutional investors have rediscovered the timber supply chain, and new timber technologies are making it possible to build high-rise buildings and highway bridges out of wood. The value of wood as a raw material is increasing, timber construction is booming, and with it the entire industry.
The Paris Climate Agreement and the net-zero targets of companies and countries are further increasing the relevance of the forestry and timber industry and making it attractive for investors. There is a global search for readily available CO₂ storage options. The Timber Finance Initiative is convinced that CO₂-storing wood installed in houses over the long term will become internationally recognized in the future as the cheapest, rapidly scalable negative emission technology (carbon dioxide removal technology).
Focus on the CO₂-storage capacity
"Because the majority of existing Timber Indices focus on forests or short-lived paper production, Timber Finance has developed its own index. Our index tracks the entire value chain of modern engineered timber construction. The focus is on companies that contribute to the production of durable wood construction products," said Erik Reichmuth, managing partner of the Timber Finance Initiative.
"There is a knowledge and investment gap between the financial market and the modern forest and timber industry. The Timber Finance Initiative closes this gap with modern financial products. After all, wood - from forests to timber construction - is the real hidden champion in sustainable finance and belongs in the portfolio of every climate-conscious investor," explains Thomas Fedrizzi, Timber Finance Initiative Board Member.
Liquid product planned
The "Timber Finance Carbon Capture and Storage Index" serves as the basis for investable financial products. TFI plans to launch index-based products for climate-conscious investors in the coming months. We are currently offering banking and product partnerships for these products. Other investment products such as a Timber themed fund are in the pipeline.
- Thematic focus
The index focuses on the long-term use of wood and the use of wood elements in construction. It covers the entire value chain, from primary production to sales stage 4.
- All industry sectors
1,600 companies were analyzed. Thanks to the industry-specific weighting, all industrial sectors are represented, from securing raw materials in the forest, through sawmills and glue plants, to the finished building.
- Focus on innovation and "game changers
Innovative companies from the wood bio-economy and wood product manufacturers have been integrated as well as leading companies from the construction industry with a proven wood construction strategy.
- Exclusion criteria
Companies with majority operations in paper, packaging, cellulose, furniture and other short-term wood products were excluded.
About the Timber Finance Initiative
Founded in 2021, the Timber Finance Initiative connects the financial and capital markets with the modern forest and timber industry through the development of new financial products, CO₂ storage measurement methodologies, Timber Investment 2.0 white papers, Timber Asset Management, a Knowledge Hub, training and consulting.