A report in the magazine Science this month made headlines around the world: planting one trillion trees might curb climate change.
Less well-publicized are the growing number of companies, startups, funds and investors betting they can pair trees with profitability. That itself can be a complicated exercise in sustainability.
The Paris Agreement of 2015 gave businesses added incentive to try alternative methods to secure funds and space for planting trees, according to a recent report from the World Resources Institute and The Nature Conservancy. Some approaches borrow from the idea of a sharing economy pioneered by companies like Uber, such as planting in smaller farm plots as an alternative to large commercial tree-growing methods. Firms are also testing planting trees to clean and manage wastewater.
“Investors are recognizing that there are opportunities, both in more traditional sectors, as well as the venture capital-startup sort of approach,” The Nature Conservancy’s Eriks Brolis, a co-author of the WRI report, told Karma in an interview. Brolis also manages a U.S. grant program that looks for ways to speed ways for natural lands to capture carbon.
While there’s no official market size estimate for impact investing tied to trees — the category is highly fragmented — median sales growth of companies mentioned in the report doubled in a year. One 2015 study estimated the economic impact of the American “restoration economy” alone at about $9.5 billion, with another $15 billion in closely tied industries.
Traditional land-preservation funds are attracting attention from Wall Street banks like J.P. Morgan Chase & Co. , Goldman Sachs & Co., and Credit Suisse Group AG as governments and companies start on carbon and look for ways to stem costs associated with climate change.
Ten such funds were created in 2017 and 2018, an April report from the Global Impact Investment Network found. That’s a faster pace than the four created between 2008 and 2010. GIIN surveyed 34 investment vehicles that manage $9.4 billion.
New Hampshire-based Lyme Timber Co. has owned and managed timberland and rural real estate in the U.S. and Canada for more than four decades. Lyme closed a $300 million round for its fifth investment fund in 2018. The company has profitably preserved more than 850,000 acres, according to its website.
Lyme uses easements, a kind of lease or temporary right to use its land, for a fee. Its agreements make sure land isn’t used for development. Sale proceeds are put toward managing acquired land through sustainable forestry, recreational uses like hiking, hunting and fishing, said Peter Stein, a Lyme managing director and leader in several conservation advisory .
Returns are high enough to attract traditional private investors, Stein said, noting some participants now come from places like Goldman Sachs.
“Half of our investor base are self-identified ESG/impact investors,” Stein told Karma in an interview. “The other half is not, but they don’t seem to mind that we do permanent conservation with our land.”
A move toward machine learning and savvy data use is, in general, stoking demand, Stein said.
“Even the trillion trees, they sort of have to go in the right places,” Stein said. “And so it’s how do we use big data and machine learning to accelerate the knowledge about what sites are going to be most resilient for forests to be conserved and new forests to be created?”
Land Life Company, founded in 2013 and based in Amsterdam, uses data and a proprietary biodegradable protective cone that helps tree saplings adapt to harsh environments like areas destroyed by fire or deforestation. Its global projects include rebuilt highway embankments in Tijuana, Mexico to forests in of Spain and Texas as part of Dutch car lessor LeasePlan Corp.’s carbon offset program.
Land Life’s projects are profitable, and it’s investing gains back into the business, Jurriaan Ruys, CEO and Land Life co-founder, told Karma in an interview. After $3.9 million (€3.5 million euros) in series A funding last year, Land Life doesn’t expect to need any outside fundraising for at least the next 12 months, if at all. Ruys said he’s adding to the firm’s 30 employees amid expansion.
“We think we have an opportunity to grow smart and reinvest our operational cash flow, and grow the company that way,” said Ruys, a former McKinsey & Co. partner. “So far, that has worked pretty well.”
Greenprint Partners, based in Chicago, uses natural infrastructure, including street trees, to help clean and manage wastewater systems. It’s focused on low- to moderate-income neighborhoods hit by urban flooding and polluted water.
One Greenprint project, in Peoria, Illinois, added 100 raised garden beds and other features to manage a sewer system that regularly overflowed into the Illinois River. It uses a stormwater forest with poplar trees, known for their ability to absorb and clean polluted water
“Cities are getting savvier and savvier,” Rose Jordan, Greenprint’s marketing manager, told Karma.
Greenprint is seeking $2.75 million through a seed and fundraising round anchored by Spring Point Partners, Jordan said.