For years, it was accepted that protecting forests was the job of charitable organizations, funded by foundations or private individuals. A German environmentalist named Harry Assenmacher came to feel that this was a faulty assumption.

In the 1980s, Assenmacher was working for NGOs and organizations such as Friends of the Earth Germany. “I found that the NGO work was very important, but to do good things for the environment you have to change the economic system,” he said.

When ecologists turned their focus to reforestation as a tool to reverse climate change, he decided that any meaningful large-scale reforestation project would need to be financed by a company, not charities.

That was the seed of ForestFinance, the firm he founded in Bonn. It sells “sustainable forest products” as an investment class, akin to stocks and bonds.

The firm invites investors to buy shares (i.e. trees) in forests that are ethically and sustainably managed.

In Panama, Colombia, Peru and Vietnam, the company’s partners plant new forests on fallow grasslands that were once tropical rainforests. These are not mono-culture tree plantations, which deplete the soil and may accelerate climate change, but rather mixed-species forests, designed to provide habitats for wildlife and offset CO2 emissions. ForestFinance also adds a mix of tree species to existing monoculture forests for more biodiversity.

ForestFinance has competitors, but Assenmacher says they tend to do monoculture tree farming, which doesn’t focus on biodiversity or social impact. His company’s forests are certified by the Forest Stewardship Council, an independent nonprofit. And ForestFinance guarantees fair wages and good working conditions for its employees, who are often indigenous people.

Investment products include long-term and short-term plans. In the TreeSavingsPlan, customers lease a parcel of land on which trees are planted. Twenty-five years later the trees are selectively harvested, leaving the forest intact; investors earn money off the sale of timber. The plan costs €396 (US$450) over one year, and anticipates annual returns of 6 percent over 25 years, for revenues of €1,740 per share (payments are not made annually).

For those who prefer not to wait so long to see returns, there’s the CacaoInvest, a one-time investment of €3,250 to lease 1,000 square meters of land in Peru or

Panama, for sustainable, single origin and free trade cocoa. Payouts begin in as early as five years.

Investing in forests is not without risk, including fire, drought and insects, so ForestFinance offers insurance for the first five years after planting, when trees are most vulnerable.

But Assenmacher’s bigger risk was attempting to create a company of this kind back in the 1990s. At first, he tried it out as a private individual, investing €1,000 to buy and reforest a few hectares in Panama as a kind of personal pension fund. A “few very brave friends and family” members joined him, each investing a little bit.

Those early investors have received small payouts for harvested wood and carbon credits, though the bulk of their returns will come in five to seven years. Meanwhile, people who invested in GreenAcacia have earned approximately 6 percent a year, and the first clients for CacaoInvest received payouts from an initial cocoa harvest.

Satisfied that his experiment could work, Assenmacher officially founded ForestFinance in 2005. It grew much faster than anticipated. “Unfortunately, our predictions about climate change came true, the problems got bigger,” he said. “Investing into real assets and sustainable investments and into forests became more and more normal.”

Over the past decade, ForestFinance has collected over $10 million from 17,000 clients. More than 90 percent of them are in Germany, with newer investors elsewhere in Europe. (In 2013, ForestFinance created an offshoot in France.)

Assenmacher said any criticism of his company generally comes from the conservative investment community (since ForestFinance profits tend to be lower than those of traditional stocks) or from environmental activists: “Earning money with trees is a bad thing, they say.” His response to environmentalists is, “if you want to save the environment, you have find a way of sustainable production.”

One private investor who appreciates this logic is Tom De Fauw, a senior business developer at a French multinational electricity company who spent years living in tropical countries for work. “Basically I could witness with my own eyes how fragile nature and biodiversity is,” he said. “It’s part of our job as humans to defend the defenseless, whether it’s other human beings or animal species and plants.”

De Fauw bought a product that helps reforest Darien Province in Panama, one of the poorest regions of the country. Later, he bought Acacia mangium to help diversify a plantation forest in Colombia. All told, he invested about $30,000, a substantial sum for someone whose other investments run to some stocks and his mortgage.

So far De Fauw has seen only a small return from the sale of carbon credits, but he is optimistic about long-term results. And, he said, “It’s a feel-good investment.”

For more information

Website: https://www.forestfinance.de/en/

Video: http://www.sparknews.com/en/video/forest-finance-investing-your-savings-forest

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