TY - JOUR T1 - The Forestry Investment Total Return (FITR) Index JF - The Journal of Alternative Investments SP - 131 LP - 150 DO - 10.3905/jai.2021.1.125 VL - 23 IS - 4 AU - Colm Fitzgerald Y1 - 2021/03/31 UR - https://pm-research.com/content/23/4/131.abstract N2 - There is an emerging global trend toward more responsible and sustainable investment practices that is creating an increased appetite for forestry investments. This is against a backdrop of a dearth of forestry investment performance data of the kind suitable to aid econometrically significant investment projections. This article uses historical roundwood timber and lumber price data combined with a forestry discount rate to synthetically create historical forestry investment returns for the last two centuries. A Forestry Investment Total Return (FITR) Index is created from these data. A key advantage of the index is not relying on smoothed timber prices, making returns more representative of their reporting period. The FITR Index shows forestry investment outperforming equities over long durations, with a lower standard deviation of returns and a positive, rather than negative, skew of returns. The article suggests that responsible and sustainable investments can produce strong investment performance.TOPICS: Other real assets, mutual funds/passive investing/indexing, performance measurement, ESG investingKey Findings▪ The study estimates US forestry investment returns averaged 9.24% per annum from 1871 to 2018 with a standard deviation of returns of 12.3% and a positive skew of 88%. Comparable returns on US equities were 8.95% per annum with a higher standard deviation of 17.9% and a negative skew of 13%.▪ Estimated forestry returns are based on an assumed forestry discount rate and changes in US timber prices over the period. The article shows that changes in timber prices relative to consumer prices have a consistent pattern going back to 1269.▪ Forestry investment is likely to be a win–win for investors seeking sustainable investments and for policymakers by providing the potential for strong investment returns while also tackling environmental and climate change. ER -