stakeholder dialogue 2013 presentation

8/13/2019 Stakeholder Dialogue 2013 Presentation

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Linking Sustainable ForestProduct Supply Chains

through Asia

PEFC Stakeholder Dialogue 2013

14-15thNovember, Kuala Lumpur

1


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2

Timber Certification and the Role

of ITTOEmmanuel ZE MEKA, Executive Director

International Tropical Timber Organisation


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Bruno Cammaert

FAO Regional Office for Asia and the Pacific

Bangkok

PEFC Week, Kuala Lumpur,

November 2013

State of forestry in the

Asia-Pacific Region


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Structure of the presentation

Forest cover change

Forest products

Forest use and tenure

Drivers of change

Progress towards SFM


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Forests of Asia and the Pacific - 2010

OF TOTAL LAND AREA

740,000,000ha

26%But only 0.2 ha

per person


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Forest area by sub-region2010

(million ha)

255

80214

191


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Forest Area Change 1990-2010

0

100

200

300

400

500

600

700

800

East Asia South

Asia

Southeast

Asia

Oceania Asia and

the Pacific

Area(million

hectares).

1990 2000 2010


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Primary forests

19% OF ASIA-PACIFIC FORESTS

30%OF SOUTH EAST ASIAS FORESTS

34% OF THE WORLDS FORESTS


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Other naturally regenerated forests

63%OF SOUTHEAST ASIAS FOREST

65%OF ASIA-PACIFIC FORESTS



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Planted forests

16% OF ASIA-PACIFIC FORESTS

7% OF SOUTHEAST ASIAS FORESTS



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Wood productsindustrial round wood

010

20

30

40

50

60

70

80

millionm3

Import & Export of Industrial Roundwood (Asia)

Import

Export

0

5

10

15

20

25

millionm3

Import & Export of Industrial Roundwood (Oceania)

Import

Export

ASIA

OCEANIA


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Wood productssawn wood, panels, and

paper

0

20

40

60

80

100

120

millionm3

Sawnwood Production

020

40

60

80

100

120

140

160

180

millionm3

Wood-based Panel Production

0

20

40

60

80

100

120

140

160

180

milliontonnes

Paper and Paper Board Production

Asia

Oceania


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Wood productskey trends

Significant decline in woodproduction in some countries

Exhaustion of forest resources

Concerns about environmental

protectionRegional focus Internationalfocus

Round wood exports Value-added exports

Emergence as a majorproducer/exporter of woodenfurniture


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Forest Tenure

Forest ownership in Asia-Pacific

Private

sector

4%

Owned oradministered

by

governments

68%

Owned or

designated

for use by

communities

28%


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Forest Use

32% primarily for theproduction of wood andNWFPs

20% multiple-usemanagement

14% Conservation ofbiodiversity


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Key drivers of change

What happens to forests and forestry is

determined to a large extent by whathappens outside the forestry sector and

by larger societal changes.


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Key drivers of change: Demographics

Asia-Pacificworlds mostdensely populated region

Population increase

3.6 billion (2005)4.2 billion (2020)

Greatest increases indensely populated

developing countries

Urban population38% people in urban areas (2005)

47% people in urban areas (2020)


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Key drivers of change: Economics

High growth rates increasing thedemand for food, fiber and fuel

Poverty rates will decline, but thenumber of poor will remain high

Recent reductions, export orientatedcountries hit hardest (e.g., Cambodia,Malaysia, Thailand)

Swelling middle class

Structural changes: Declining importance of agriculture in

income and employment Globalization Diminishing importance of the role of

governments


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Key drivers of change: Agriculture

Agricultural expansion is theprimary reason for forestconversion in many countries

A few agricultural cropsaccount for a largeproportion of deforestation

Rubber plantations are

expanding in forest areas

Oil palm plantations set tospread significantly


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Key drivers of change: Infrastructure

Road network expansiongreatest in moredeveloped countries

Impacts greatest in less

developed countries


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Key drivers of change: Politics and

policies

Greater democracy and political accountability

Transparency in functioning and accountabilityof public institutions and officialsrights toinformation

Forest governance under increased public

scrutiny

Demands for participation in public policydecision making

Shift from timber-focused management tomultiple-use management

Greater emphasis on ecosystem services andsustainable development

Potential contributions of forestry to green

economy


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Key drivers of change: Societal and

Environmental concerns

Local and national issues andactions

Global and regionalenvironmental

drivers:

International commitmentsand the outcomes of climatechange negotiations

Pressure from stakeholdersin the global forest resource


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Progress toward Sustainable Forest

Management

Improved stakeholder participation andlocal forest tenure mainstreamed intoNational Forest Programmes

Sustained efforts in

REDD+ readiness

FLEGT: demand and supply

Third party certification of

legality, SFM andChain-of-Custody

Payments for ecosystem services (PES)


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Thank you


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25

Snapshot of Forest Certification

in the Asia regionBen Gunneberg, Secretary General

PEFC Council


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Forest Certification Globally

26

90%

10%

72%

28%

10% of the world forests are certified (UNECE/FAO 2013) 28% of industrial roundwood production is certified

60% of total certified area is PEFC

60%

40%


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Forest Certification in Asia

27

98%

2%

2% of forests in Asia are certified (UNECE/FAO 2013) 8% of forests in Southeast Asia are certified (WB/Profor 2012) 11% of production forests in Southeast Asia are certified

(WB/Profor 2012)

8%

92%

11%

89%


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National progress in Asia

28

0

1

2

3

4

5

6

MillionHectares

CFCCSGEC

LEI

FSC

PEFC

Source: 2013, Certification systems published data


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MarketsChain of Custody

29

6609

775378

FSC

PEFC

SGEC

Total of 7768 CoC certificates in Asia

Source: 2013, Certification systems published data


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Reasons for optimism?

Legality & Governance issues being addresses at the highestlevels

FSC actively promoting certification in many countriesthroughout the regionresults are evident

PEFC working to scale up its Asia Promotions Initiative andexpand our presence in the region

Number of national certification organizations emerging with thepotential to achieve wider uptake in forests & markets

Companies continuing to make commitments to sourcingsustainable productsdriving up demand signals

WBCSD Declaration, Consumer Goods Forum, Unilever, etc

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THANK YOU

PEFC International10 Route de lAroport, 1215 Geneva, Switzerland

[email protected]

31


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through Asia



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33

PEFC Stakeholder Dialogue 2013The EU FLEGT Action Plan lnfluencing

Forest Industry Transformation

EFI FLEGT FacilityAsia Regional OfficeKuala Lumpur, Malaysia14 November 2013


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34

EU FLEGT Action Plan 2003Objective:

Address the driving forces of illegal logging both on thedemand side as well as in the timber producing countries

Course of Action/Main InstrumentsPublic Procurement Policies (demand)Voluntary Partnership Agreements (supply)EU Timber Regulation (demand and supply)


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35

FLEGT Global Historical perspective

1999 2000 2001 2002 2003 2009 20102004 2005 2006 2007 2008

G8

Forestry

Action

Program

-1998-IL as 1 of5 areasof action

2011 2012

US Lacey Actamendment

AustralianIllegal Logging

Prohibition Act

East Asia

FLEG

Bali

Africa

FLEG

Yaound

Europe &

North Asia

FLEG

St Petersburg

Regional FLEG ministerialmeetings

FLEGT

EU Action

Plan

FLEGT

regulation

FLEGTimplementing

regulation

EU Timber

regulation

EU FLEGT AP


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36

What is a Voluntary Partnership Agreement?

Legally-binding bilateral treaty (not voluntary onceagreed)

Timber-producing countries agree to licence theirtimber exports as legal

EU agrees to accept only licensed importsBacked by EU trade legislation (2005 FLEGTRegulation)

Legality assured through an agreed Timber LegalityAssurance System (TLAS)

Supported where necessary with developmentcooperation


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39

EU Timber RegulationWhat products are covered?

Most timber products are covered. The products covered may change in future.

Covered (almost all):

Not covered:

1

2

Solid wood products

Flooring

Plywood

Pulp and paper

Recycled products

Musical instruments

Printed matter including

magazines, newspapers and books

Some special products, like wooden

toys


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40


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41

How do businesses comply with the EU Timber

Regulation?

accompanied by FLEGT- license which attests to its legality.

Other means of providing information on legality

Private sector initiatives :Timber certified under the main

forest certification schemes is still subject to due diligence

requirements.


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42


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43

FLEGT-related discussions at ASEAN level


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Promoting specific regional exchange toshare lessons and address challenges


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45

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

mioU

China s forest products imports from Malaysia

others

veneer

particleboard

fiberboard

paper

plywood

sawn wood

logs


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46

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

MioU

China s forest products imports from Indonesia

others

particleboard

fiberboard

veneer

plywood

wood chips

paper

sawnwood

pulp


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47

0

100

200

300

400

500

600

700

800

900

1000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

MillionUS$

China s forest products imports from Vietnam

others

veneer

wood charcoal

paper

Sawnwood

Furniture

Logs

Wood chips


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48

0

200

400

600

800

1000

1200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

mioU

China s forest products imports from Thailand

others

fiberboard

wood pulp

particleboard

paper

wood chips

sawn wood


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49

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9 10 11 12

mioU

China s forest products imports from Laos

Others

Sawn wood

Logs


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50


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53

Thank youEU FLEGT FacilityTomi Tuomasjukka00358 50 433 [email protected]


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China-Africa FLEGT VPA Information-sharingWorkshop, October 2013.


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57

Thank-you.


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through Asia



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FOREST CERTIFICATION & ILO CORE LABOURCONVENTIONS

BWI BUILDING WOOD WORKERS INTERNATIONAL


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BWIBUILDING WOOD WORKERS INTERNATIONAL

WHO WE ARE

The BWI (www.bwint.org) :

Global union Federations on Wood, Forestry,Construction and Building Material Sectors;

328 Free and Democratic Trade Unions around theworld, 89 of them in Asia-Pacific Region;

Representing more than 12 million members around theworld;

Number of International Framework Agreements (IFAs):

Mission: to promote the development of trade unionsin our sectors throughout the world and to promote

and enforce workers rights in the context ofsustainable development.

Pacific Rim Forestry Network SUPPORT GROUPSILO


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Japan/ChinaGovt Agreement

PacificIP-SFM

Legal NetworkOrganising

Unsustainable Logging

SEA

Unsustainable loggingOutsourcing

FC/MNCOrganising

Online

Capacity Building

Solidarity Actions

South Asia

Unsustainable loggingSelf-Help Groups

Organising

ILORegional Networks

REGIONAL INITIATIVES


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REGIONAL INITIATIVES

WOOD IS GOOD, CERTIFIED WOOD IS THE BEST!

Promoting Forest Certification Schemes coupledby organising unions in certified companies

Japan

Malaysia

Indonesia

Vietnam

Myanmar

New Zealand

India Nepal

Pakistan


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REGIONAL COOPERATION POSSIBILITIES


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REGIONAL COOPERATION POSSIBILITIES

WOOD IS GOOD, CERTIFIED WOOD IS THE BEST!

Pan-ASEAN Timber Certification Initiative

Climate Change

ASEAN

ADB

PILOT PROJECT COOPERATION ON MYANMAR FOREST


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PILOT PROJECT COOPERATION ON MYANMAR FORESTCERTIFICATION

CERTIFICATION: WHY IS IT IMPORTANT?

Certification:

Ensures legality of the woods andproducts;

Secures a higher priced, highly soughtafter timber;

Adds value to the wood products:Myanmar Timber is $500 per ton vs.Malaysian Timber is $20,000 per ton;

Enables unions to organise and promotedecent work.

PROPOSED PROGRAMME COOPERATION FRAMEWORK


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PROPOSED PROGRAMME COOPERATION FRAMEWORK

Evolve the national forestry certification scheme through

tripartite mechanism process

Confidence and Capacity Building Measures

Strengthening of Technical Assistance in cooperation withMTCC and PEFC

Tripartite workshop on promotion of Decent Work Agenda inwood and forestry industry

Training progarmme on ILO Core Conventions

Joint training for auditors

Exchange programme Trade Union Development

FOREST CERTIFICATION & ILO CORE LABOUR CONVENTIONS


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FOREST CERTIFICATION & ILO CORE LABOUR CONVENTIONS

CERTIFICATION: WHY IS IT IMPORTANT?


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through Asia



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Responsible Asia Forestry and TradeA partnership for strengthening capacity and sharing knowledge

Chen Hin Keong, Forest Trade Programme Leader, TRAFFICAndrew Ingles, Chief Technical Adviser, TNC

November 2013

RAFT (2012-2015)


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( )

Provide capacity building & knowledge sharing services

to promote trade in responsibly harvested &

manufactured wood products

More verified legal products traded

More forests independently certified sustainably managed.

RAFT recognizes the Forest Stewardship Council (FSC)certification scheme as the current premium standard

Reduced CO2 emissions from land-use change & forestry

RAFT P


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Institute for Global Environmental Strategies (IGES)

Analytical inputs on timber legality and sustainable forest management

certification

Conducted a RAFT study on the potential role of Customs Authorities

Produced the first draft of the ASEAN chain of custody guidelines for timber

Undertaking a comprehensive review of timber legality issues in PNG

RAFT Partners

TFT (The Forest Trust)

RAFT work in Indonesia, Vietnam, Lao PDR & China

Develops industry guidance documents for producers, processors &

exporters on how to meet legality requirements

Provides in-person practical training to:

improve the level of legality compliance

make progress towards credible certification standards in the factory &

forest

RAFT P


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Tropical Forest Foundation (TFF)

RAFT work in Indonesia & Papua New Guinea

RIL training for forest concessions & training organisations

Facilitates legality & chain-of-custody audits & related trainings for forest

industries and concessions

Provides certification support in technical & management matters

RAFT Partners

TRAFFIC, the Wildlife Trade Monitoring Network

RAFT work in China, Indonesia, Lao PDR, Myanmar, and Viet Nam

Contributes to awareness raising of forest managers & processors about: specific steps to ensure compliance with relevant forestry legislation

where operators can find additional resources & assistance

Provides support & capacity building for selected companies & industry

associations on legality standards & verification systems

RAFT P t


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WWF Global Forest & Trade Network (GFTN)

Alongside TRAFFIC, developing practical guidance for establishing legality

verification systems including:

updating GFTNs Guide to Legal and Responsible Sourcing and

Exporting in a Shifting Legal Landscape

raising awareness and understanding of legality issues

Providing technical assistance to selected tree growers, companies, industry

associations & training institutions regarding legal compliance

Providing support to forest management companies for mainstreaming legal

& responsible forest management using GFTNs existing model, tools and

learning

RAFT Partners

RAFT P t


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The Nature Conservancy (TNC)

Provides strategic coordination for the RAFT Partnership as a whole

Implements activities at the regional level and in China, Indonesia & PNG

Supports policy and systems development governing land management &spatial planning

Provides technical support to national timber legality verification systems in

China and Indonesia

Pioneering logging practices that reduce carbon emissions

Helping roll out community-based natural resource management in PNG

RAFT Partners


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.

RAFT Support:

Some financial support for selected buyer-supplier

dialogues & international knowledge sharing events

Mostly provides technical assistance to governments,

forest managers, wood processors, & buyers of wood

products through its implementing partners


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www.responsibleasia.org


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Linking Sustainable ForestProduct Supply Chainsthrough Asia



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RECOFTCs Regional Experiences

with Forest Smallholders

Martin Greijmans

14 November 2013

PEFC Stakeholder Dialogue, Kuala Lumpur

Brief Organizational Background


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Brief Organizational Background

Mission:Local communities and indigenous people areactively engaged in sustainable management of forest

landscapes

Vision:Capacity development for optimum social,economic, and environmental benefits

Engages with various stakeholders, including

governments, NGOs, private sector and local communities

Since its foundation in 1987, has trained over 25,000

people from more than 27 countries

3 Guiding Principles


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3 Guiding Principles

Good

governanceFair benefits

Strong and

secure rights

Transforming

Forest

Conflicts

People, Forests,

and Climate

Change

Securing

Community

Forestry

Enhancing

Livelihoods

and Markets

RECOFTCs Functional Approach


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RECOFTC

Knowledge

Hub

Training and

learning

networks

Research,

analysis and

synthesis

Strategic

communication

Piloting and

demonstrating

RECOFTCs Functional Approach

F t S llh ld


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Forest Smallholders

More than 450million peopledepend on forests in Asia and thePacific, earning an income of 20%

Forest-based community enterprisesaccount for 13-70% of all forestryenterprises

ForInfo Project


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84

jTeak Collateral

Background: Teak harvested prematurely

for immediate cash needs

Lack of economic and

silvicultural consideration

Issuing Teak Management

Certificates:

Tree valuation data, Farmeridentity, Plot location

Information for future

planning: thinning plans and

thinning products

ForInfo Project


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Outcomes:

Smallholders secure clearer tenure rights

Longer rotation of teak cultivation,

mature trees more valuable Used as collateral for microfinance loans

Certification provides stand and financial

valuation

Improve negotiating power ofsmallholders

Securing user rights and creating access to microfinance

for smallholder teak plantations

jTeak Collateral

FSC T i i f T i A i


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FSC Training of Trainers Asia

Aim:

Develop pool of localtrainers to support and

respond to specific needsof smallholders inachieving FSC certification

More clearly link

certification to livelihoods,value chains, businessmodels, and enhancedmarket linkages

FSC, PEFC, REDD, FLEGT may exacerbateregulations for communities & smallholders


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November 25, 2013 87

Different scale of regulatory barriers according to forest type and

tenure arrangement

The number of

regulations increase

along the continuum

from plantations to

natural forests, while forincome per hectare is

the opposite (i.e. higher

for plantations than for

natural forests)

regulations for communities & smallholders

RAFT and Conflict Transformation


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Promote social justice in

SFM practices In part by reducing incidence

and negative impact of

natural resource conflict



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Approach with RECOFTC:

Training of Trainers in Conflict

Transformation

Build confidence, skills, andconnections of practitioners

working with timber industry

Promoting collaborative

management and conflictresolution helping producers

attain certification

Promoting HCVF as a standard

FLEGT & RECOFTC Th il d


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FLEGT & RECOFTC Thailand

In Thailand FLEGT allows for renewed claim

for communities to play a role and become a

respected actor in the timber sector RECOFTC is raising awareness of the CF

Networks and CSOs about VPA process

Enabling them to participate actively futuregovernment-led consultations

Wh t N t?


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Whats Next?

Beyond the forest: Broad landscape approach Link with agriculture and energy policies

Improve capacity of small entrepreneurs

Business planning & development skills Links to markets, finance, policy processes

Ex: Rights and Resources Initiative (RRI) collaboration, Ongoing efforts to engage communities and improve role

in forest sector RECOFTC brokering PPP processes: collaboration withprivate sector with increased understanding, mutual gain

Ex: Stora Enso

Forest Connect AsiaAsia


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Forest Connect Asia Support smallholder enterprises

to connect to each other, policies

and markets

FCA to build enterprise capacity,

facilitating and broker linkages,

pilot and document best practices

in their specific context

Thank You


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For further information, please contact

Martin Greijmans

[email protected]

www.recoftc.org

Thank You


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94


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Investors supportingtransformation towards

sustainability in the forestry

sector

Adam Grant

Manager, Certification and Environmental Markets

PEFC

Kuala Lumpur, Malaysia

November 2013

Important Note


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Slide 96

New Forests 2013. This publication is the property of New Forests. This material may not be reproduced or used in any form or mediumwithout express written permission.

The information contained in this publication is of a general nature and is intended for discussion purposes only. The information does notconstitute financial product advice or provides a recommendation to enter into any investment. This presentation has been prepared withouttaking account of any personsobjectives, financial situation or needs. This is not an offer to buy or sell, nor a solicitation of an offer to buy or

sell any security or other financial instrument. Past performance is not a guide to future performance. Past performance is not a reliable

indicator of future performance. You should consider obtaining independent professional advice before making any financial decisions. Theterms set forth herein are based on information obtained from sources that New Forests believes to be reliable, but New Forests makes no

representations as to, and accepts no responsibility or li ability for, the accuracy, rel iability or completeness of the information. Except insofaras liability under any statute cannot be excluded, New Forests, including all companies within the New Forests group, and all directors,

employees and consultants, do not accept any liability for any loss or damage (whether direct, indirect, consequential or otherwise) arising

from the use of this presentation.

The information contained in this publication may include financial and business projections that are based on a large number of assumptions,any of which could prove to be significantly incorrect. New Forests notes that all projections, valuations, and statistical analyses are subjective

illustrations based on one or more among many alternative methodologies that may produce different results. Projections, valuations, andstatistical analyses included herein should not be viewed as facts, predictions or the only possible outcome. Before considering any

investment, potential investors should conduct such enquiries and investigations as the investor deems necessary and consult with its own

legal, accounting and tax advisors in order to make an independent determination of the suitability, risk and merits of any investment.

New Forests Advisory Pty Limited (ACN 114 545 274) is the holder of AFSL No 301556. New Forests Asset Management Pty Limited (ACN 114

545 283) is registered with the Australian Securities and Investments Commission and is an Authorised Representative of New Forests

Advisory Pty Limited (ACN 114 545 274, AFSL 301556). New Forests Inc. has filed as an exempt reporting adviser with the Securities andExchange Commission.

Overview of New Forests


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Slide 97

Founded in 2005

Managing forestry investment for

institutional investment clients

Currently managing nearly US$2 billion in

assets in the Asia-Pacific region

Head office in Sydney; 38 employees in

Australia, New Zealand, Singapore, and

San Francisco

Managing over 420,000 hectares of land

and forestry assets across the Asia-Pacific

region and United States

New Forests has generated excellent

returns to our clients over 8 years, and hasaimed to operate as a leading sustainableand responsible investor in the forestry

sector

What Differentiates New Forests?


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Slide 98

Strategically, New Forests is

1. Focused on Asia Pacific opportunities

Unique for a TIMOheadquartered in Sydney with an office in Singapore Largest forestland owner in Australia and active in markets throughout

Australia, New Zealand, and Asia

Providing investors with exposure to the integrated Asia Pacific regionaltimber tradeextensive experience in domestic and export markets

2. A leader in sustainable forest management

Investment team experienced in sustainable forest management andenvironmental markets; company-wide Social and EnvironmentalManagement System

Member of Forest Stewardship Council (FSC) International and FSCAustralia

Signatory to United Nations Principles for Responsible Investment (PRI)

3. Forward Thinking Engaged with international NGOs, and participating in global initiatives

including World Economic Forum Global Council, Aspen Institute, etc.

New Forests Business


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Slide 99

New Forests Pty Ltd (Sydney)

Sydney

Australia New ZealandForest Fund

Australia New Zealand

Forest Fund 2

Singapore

Tropical Asia Forest Fund

San Francisco

The Eco Products Fund

Forest Carbon Partners

Mitigation Partners*

Back Office, Administration, Risk and Compliance Systems and Governance

Financial and Forest Resource Modeling Services

Sustainability and Responsible Investment

Investor Services

Tropical Asia Forest Fund - TAFF


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Slide 100

TAFF is a commingled fund investing in tropical timber plantations in SouthEast Asia with US$171 million in commitments. Clients include pensionfunds and development banks.

Forestry in Asia is changing:

Originated from logging concessions in natural forests

Low cost of timber from these concessions meant attractive returns were possible withoutoperating efficiently or sustainably

Natural forest timber has been largely depleted

Global concern over rainforest logging and a demand for certification and sustainableforest management models are on the rise

Fast-growing, high-quality managed timber plantation estates are emerging as the basisfor the future of the industry, which will require significant capital

TAFF will:

Invest in existing forestry enterprises or assets

Upgrade and expand those businesses

Help Implement modern forestry systems and practices

Obtain certification and where possible, access environmental markets

Exit after 10-15 years of investment

The Changing Forestry Landscape


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Slide 101

1. Shift to plantations and thedeclining economic frontier ofnatural forests

2. Global timber demandgrowing and restructuring toaccommodate Asian demandgrowth

3. Shifts in Pulp & Paper markets

and increasing demand forbio-energy, bio-fuels, andother bio-products

4. Rising institutional ownershipof high productivity timberplantations

5. Sustainability imperatives andthe pricing of ecosystemservices

Three-year old Teak PlantationSolomon Islands

Natural Forest Harvest in SE Asia in Decline


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Slide 102

Steady Decline in Natural Forest Logging in Malaysia and Indonesia

Source s: Malaysia Timber Council and personal communication with Yayasan Sabah; ITTO; Indonesian Forestry Department Annual Report, 2008.

5

10

15

20

25

30

35

40

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

LogProduct

ion(Mm

3)

Malaysian Log Production

0

5

10

15

20

25

1994 1996 1998 2000 2002 2004 2006 2008

Annualharvestlevels(m3m

illions)

Indonesian Log Production

Natural forests Plantation forests

Limited Plantation Investment


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Slide 103

Asia has lagged behind otherregions in the development of

commercial plantations for highervalue end uses. Significant

plantation areas in Indonesia,South China (approximately 6.0

million hectares) and Vietnam arebeing grown on short rotations

for chip/pulpwood only.

Source: New Forests Asia estimates based upon RISI 2011 Pulp and Chip wood Conference, ITTO 2005

Sus tainable Forestry Man agement Report, and government data sets. Data does not include rubber estates andis based on private/government commercial scale plantations not small holders (except for Thailand where

sm all scale private growers are fundamental to the industry)

Both China and Vietnam currentlyimport plantation hardwoods

from South America, NorthAmerica, Europe and Africa

primarily to fulfill demand forcertified timber. There are

significant cost advantages toregional sourcing.

Opportunities for TAFF


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Slide 104

Investing in Southeast Asia with

priority for Indonesia, Malaysia,

and Vietnam Attractive growing conditions,

low costs, and close access to

growing markets

Investment team in financial hub

of Singapore

Combination of existing and

greenfield plantations

Environmental, Social &

Governance (ESG) factors andenvironmental markets offer

value-add opportunities

4-year old clonal teak in Java

Sustainability as a Stay in Business Issue


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Slide 105

Institutional Investors requiresustainability policy, labour

policy, corruption and briberystandards, use of certification,and monitoring of performancestandards

Major consumer groups are

increasingly demandingcertification or product chain ofcustody documentation

Governments are underpressure to create business

environment that willencourage investment andsupport competitiveness oflocal industry

Sustainability at New Forests


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Slide 106

Responsible

Investment

SEMS

Certification &Responsible

Management

Sustainability Reporting

New Forests is a signatory to the UN

Principles for Responsible Investment

(PRI) and commits to integrating

Environment, Society, and Governance(ESG) principles into investment decision

making

ESG policies are implemented at the fund

level through a Social & Environmental

Management System (SEMS) with internal

auditing

The SEMS defines third-party certification

and responsible management

requirements relevant to the asset class

and type of investment

Sustainability reporting is integrated into

funds reporting structure and New Forests

publishes an annual Sustainability Report

covering responsible investment activities,

targets, and progress

TAFF Sustainability Goals


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Slide 107

Environmental, social and governance best practice will ensure TAFF

contributes to: Reduced greenhouse gas emissions and other forms of pollution

Maintenance or enhancement of high conservation value forests and biodiversity

Improvements in local livelihoods and safe working conditions

Recognition of indigenous rights

Third-party verified sustainable forest management will add significant value: Price premiums and better market access for certain products

Lower project and political risk through reduced social conflicts

Improved asset liquidity and lower risk-adjusted discount rates on exit

Lower cost of debt capital and better debt access, especially from development banks

Improved access to licences, operating permits or additional assets from host countries

Reputational risk reduction for fund investors

Opportunities for increasing operating efficiencies through better management

Opportunities for environmental market products from areas set aside from production

New Forests is committed to sustainable management of TAFF investments

Opportunity Costs in the Landscape


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Slide 108

Forests provide not only timber, but a myriad of other benefits related tofreshwater, carbon cycling, biodiversity conservation, human health, and wellbeing

These ecosystem services have not been priced and therefore are usedwastefully and disregarded in land conversion decisions

Leads to plantation and agribusiness industry using more land rather thanincreasing productivity per hectare

Policy in conflict with overwhelming economic fundamentals is difficult toenforce on a sustainable basis

Markets set prices for timber products, but how do we value other benefits?

Region Value of Natural Vegetation Value of land converted to

Agriculture

Malaysia $500 (logging concession after

primary harvest)

$20,000 to $25,000 (oil palm)

Brazil $155 (Amazon frontier land) $420 (grazing)

US South $2500 (mixed timberland) $6250 (cropping)

Australia $1900 (woodland properties) $4850 (mixed cropping and grazing)

Innovating Markets


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Slide 109

New Forests established Malua

BioBank in 2008 with seed

investment from The EcoProducts Fund.

The project creates an

alternative economic value forBorneos rainforests and offers

sustainability solutions for oilpalm supply chain.Unlocking Demand for Biodiversity

-Roundtable on Sustainable Palm Oil (RSPO)

compensation mechanism for past HCV clearance

-Forest Stewardship Council (FSC) compensation

mechanism for past downwards conversion

Further Investment Potential-Carbon value through proven methodology

-Impact or CSR investment to catalyze biodiversity market

growth and establish sustainable brand value

Environmental Markets Lessons Learned


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Slide 110

Price signals work SO2market drove changes in fuel from high to low sulphur coal

EU Emissions Trading Scheme (ETS) drove $ billions into carbon funds and carbon

companies Australian water market restructured agriculture to increased efficiency and more

valuable cropping

US Mitigation Banking is a $billion+ turnover industry

The finance and investment sector can facilitate change Investment funds sprang up related to the EU ETS, Australian Water market, and

Mitigation banking industrycreates liquidity to meet market needs Markets create transparency in pricing; futures and options create stability; water

rights as collateral for investment in water use efficiency

Stability is necessary, but fine-tuning is also necessary Meddling by Government killed the SO2markets

Excessive allocations and unexpectedly huge offset supply have made the EU ETS

unstable

It needs to cost more to remain outside rather than inside a scheme Lack of price premium has hampered most voluntary certification schemes

REDD has struggled to have impact because private sector is disengaged andcontinues to operate on a business as usual basis

Towards the Future


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Slide 111

Projections are that global industrial roundwood demand will begin to plateau around 2.3-2.5

billion m3per annum in 2030.

100 to 150 million hectares of commercial plantation area (2.5-3.75% of world forest cover)

could supply most of this timber, while timber production from frontier regions (Canada,

Russia, tropical natural forests) will stabilize or decline. Biomass demand may double this.

Mechanisms to price ecosystems via

REDD, BioBanking, watershed

protection, etc. alongsidecommercial timber plantations could

produce the basis for the

stabilization of conservation and

production functions

Large scale deals like NZ, Australia,

Indonesia-Norway, Boreal Canada,

etc.

Ultimately this must be driven by

private capital and investment

Can forestry represent a natural infrastructure asset class?

Canopy view of New Forests Malua Biobank in Sabah, Malaysia.

Key Points & Conclusions


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Slide 112

World timber demand will continue to rise, markets will evolve to

encompass Asian demand growth

Supply increases will primarily come from timber plantations, ratherthan further expansion of the economic margin in primary forests

Increases in plantation area are more difficult to achieve than increases

in productivity of existing plantation baseland competition will also

rise among food, energy, and fibre crops

Institutional portfolios have gone from 5% real assets in 2000 to 15%real assets today, and likely will reach 25-30% by 2025huge inflow of

capital for real estate, infrastructure, agriculture, forestry, etc.

Need fopr a financing source for conservation as well as production

this could include REDD+, biobanking, water rights, no net loss supply

chains, etc.

Social and community integration via benefit sharing, consultation, and

governance models, and respect for traditional and legal rights will be

core to sustainable outcomes


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www.newforests.com.au


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Appendices

New Forests History


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Slide 115

July 2005Company established in Sydney and

receives Australian Financial Service Licence

May 2007Establishes US office

August 2008Establishes SE Asian office

October 2009Begins Funds Management Business

August 2010Closes the AU$490 million Australia New

Zealand Forest Fund

January 2011Closes AU$415 million acquisition of

270,000 hectares of Australian forest land from the

Receivers of Great Southern Plantations

2011-2012Acquires major softwood plantations and

softwood sawmills in Australia

June 2013Final close of the New Forests Tropical AsiaForest Fund, now with commitments of US$171 million,

and first close of the New Forests Australia New

Zealand Forest Fund 2 with AU$570 in commitments

June 2013 Makes first Asian investment, acquiring

Hijauan Benkoka plantations in Sabah

Supply from Russia is Declining


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Slide 116

Russian softwood exports have hit a wall

Russian log exports havefallen dramatically over

the past six years while

lumber exports have been

flat to slightly increasing.

Source: FAOstat

0

10

20

30

40

50

60

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Millionscubicmetres

RoundwoodSawnwood

Canadian Supply Falling


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Slide 117

Policy Constraints and Mountain Pine Beetle impact will lead to near-term

decline in timber supply, leveling off in the medium to long term.

0

10

20

30

40

50

60

70

80

90

British

Columbia

Alberta Ontario Quebec

Canadian Timber Supply

2009 & 2050 Forecast

(million m3)

Softwood Annual Allowable Cut 2009

Estimated 2050

Source: Mark Kennedy, CIBC. Global Perspectives on Forest Products Trade. Presentation to Future Forestry Finance 2012.


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Australian Plantation Harvest Rising

Australian hardwood plantations are steadily replacing


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Slide 119

Australian hardwood plantations are steadily replacing

a declining supply from native forests

0

2 000

4 000

6 000

8 000

10 000

12 000

'000m3

Native and Plantation Hardwood Harvest

Native Plantation

Source : ABARES, Forest and Wood Product Statistics.

Increasing Importance of Plantations


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Slide 120

Global industrial roundwooddemand is likely to rise from 1.5billion m3in 2013 to 2.5 billionm3by 2050

Somewhat speculative forecastssuggest biomass energy, biofuelsand biomaterials demand coulddwarf industrial roundwooddemand over next 30 years*

Almost all incremental supply willcome from timber plantationsboth productivity enhancementand plantation area will need toincrease

Investment needed could rangebetween $100 and $500 billion tomeet these levels of demand

Source: FAO, 2010. Global Forest Resource Assessment.

*WWF, 2013 Living Planet Report

Plantation Productivity Can Increase


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Slide 121

0

200

400

600

800

15

20

25

30

2012 2025 2035 2045 2055 2065

T

RV-TotalRecoverableVolume(m3/ha)

Base Management Nutrition

Genetics TRV

AverageGrowthRate(m3

/ha/yr)

If industrial wood demandgrows at an equivalent rateto global GDP can we meetmuch of this viaproductivity enhancementrather than land base

expansion Investor strategies focus on

silviculture, nutrition, riskmanagement and geneticsto increase productivity by

50-100% over the next 50years

Example of Productivity GainsSoftwood in Australia

*Source: Timberlands Pacific Pty Ltd

What Government Policies are Needed?


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Slide 122

Future wood supply growth will largely be delivered byplantationsthis will be from existing plantations managed

more intensively and expansion of plantation areaexpansion

is a key policy challenge

As timber plantations take on increasing share of wood supply,innovation is needed in financial mechanisms for forest

conservationREDD, biobanks, supply chain initiatives

Social outcomes need to balance multiple stakeholders and

conflicting interests and rights. Innovations aroundconsultation/governance models, sharing in economic

benefits, community benefits are needed

A modern forest policy framework needs to address woodsupply, forest conservation and sustainability issues

TAFF Certification & Sustainability


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Slide 123

Third-party verified sustainable forest management will add significant value:

Price premiums and better market access for certain products Lower project and political risk through reduced social conflicts

Improved asset liquidity and lower risk-adjusted discount rates on exit

Lower cost of debt capital and better debt access, especially from development banks

Improved access to licences, operating permits, or additional assets from host countries

Reputational risk reduction for fund investors

Opportunities for increasing operating efficiencies through better management Opportunities for environmental market products from areas set aside from production

TAFF Certification Policy:

Achieve compliance against IFC Performance Standards within three years of acquisition on allassets including plantations, natural forests, and processing facilities

Achieve FSC certification on all natural forests within three years of acquisition if the assetmeets all FSC eligibility criteria

Where plantation assets do not meet all FSC eligibility criteria, engage an FSC-accreditedcertification body to undertake third-party verification of compliance with all applicable FSCrequirements and, depending on market requirements, pursue additional third-partycertification against an alternative certification system depending on market demands such asPEFC, LEI, FSC controlled wood, VLO, and/or VLC or other future standard that may bedeveloped

New Forests is committed to sustainable management of TAFF investments

External Motivations

N F d i d i S i l d E i l M


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Slide 124

New Forests designed its Social and Environmental Management

System (SEMS) in 2010 and began full implementation in 2011.

The SEMS is designed to systematically identify, manage, and reporton social and environmental issues and potential impacts.

The SEMS helps us win clients:

English pension fund manager said, Youre the only manager weve seen

who can show how they manage assets sustainably.

Dutch pension fund manager said, FSC certification is absolutely required

for us as a target and your SEMS shows us how you pursue that.

Provides a reference point and tool for due diligence

The SEMS helps us provide client services and meet requests:

Current clients ask to see audit reports

Streamlines responses to client inquiries

Risk management and continual improvement.


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stakeholder dialogue 2013 presentation

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