We believe that there is a better way which lets ordinary people like us invest responsibly in something that provides reliable growth, is backed by stuff we understand, and doesn’t contribute to killing the planet.
Here’s how it works.
There’s no ‘fin’ or ‘tech’ at this stage. We cultivate good old-fashioned relationships with forest owners all over the world so that we can purchase a standing forest or plant one. When selecting these forests, we take care to choose only those which conform to the highest standards of ethics – forests that we would be proud to own ourselves.
The wonderful thing about trees is that there are many types of forests to suit your investment objectives – some grow quicker and are used for paper, while some hardwoods grow more slowly but are eventually much more valuable when they are harvested.
Whenever we find a forest we think would make a great investment as part of our portfolio, we do the necessary checks, negotiate the management and maintenance contracts, and so on. In short, we do all the heavy lifting so you won’t have to.
The forests are then purchased and placed into a Special Purpose Vehicle (SPV), and managed by independent managers and administrators. The SPV’s profit and loss is completely independent and “ring-fenced” from our own operations at Ekofolio.
At the same time EKO tokens are issued, which are a debt claim on the value of the forest assets in the EKO portfolio. The EKO is initially issued at €1 face value, but its value rises steadily over time at 3% growth per annum to reflect the growth in value of the forest assets.
So here’s the easy part. You set up an account in a few simple steps, and invest at the click of a button.
There is of course, a small fee when you invest – we’re running a business after all. The transaction is recorded securely on the blockchain, and the tokens are safely stored in your account wallet.
The value of your EKO tokens grows at 3% per annum over 10 years, and at maturity will be worth 130% of your initial investment amount. Since your EKOs are backed by the value of the forests held in the EKO portfolio, returns are backed by the biological growth of the trees, rising timber prices, and the appreciation of the underlying land value over time.
The Net Asset Value (NAV) of each forest in the portfolio will be assessed and reported regularly by independent third party forestry experts and financial auditors, whose reports will be fully available to the public. Over time, as Net Harvest Income is reinvested towards further acquisition and planting, the NAV of the portfolio will grow to exceed the total value of all EKOs.
As each forest in the EKO portfolio is unique, revenue from each individual forest may vary on a case-by-case basis. However, Net Harvest Income is aggregated from across the portfolio and then redeployed for further forest acquisition, replanting, and even greenfield or brownfield projects. Generally speaking, income from the forest can be generated as follows:
During planting, young trees are planted close to one another. After a few years, using a process known as ‘thinning’, foresters will harvest some of these trees to make room for the rest of the trees to mature. This process may be repeated 1 or more times over the growing cycle of the forest, depending on the types of trees being grown.
Income from the sale of timber from thinning, as well as from the harvest of mature trees, is consolidated across the portfolio for reinvestment after costs have been deducted.
Additional income can be generated through other sustainable and ecological use of the land besides planting trees, again depending on the type and location of the forest. For example, hiking, camping, hunting, or fishing permits could be sold.
The land could also be used for renewable energy generation for nearby rural communities, and leases could be sold for sustainable agriculture utilising the latest agroforestry techniques.
Hang on to your EKOs, and watch them grow steadily in value. Or trade them whenever you want to take advantage of the growth. The point is, you have more choices than traditional forest owners. And as the market for EKOs grows and matures, the liquidity of your holdings will increase.
Our core mission is to catalyse investment and improve liquidity in the forest asset class. We believe that achieving this has the potential to protect biodiversity and increase sustainable forest cover worldwide.
As such, we will purchase EKOs back at 130% of face value at maturity, which is 10 years, or even at the 5 year mark or earlier, depending on portfolio growth. Our technology is also constantly evolving to make trading on secondary markets convenient and frictionless.
All token holders are granted visitation rights to most of the forests held within the portfolio, and are welcome to visit — as long as you treat them with love and respect. Periodically, we may also turn certain important decisions over to our growing community. Over time, we’ll be adding to the list of other supplementary rights and benefits, so watch this space.
Experienced investors know that no investment is fool-proof. There are always risks involved. However, sustainable forestry is one of the most stable and predictable investment asset classes around, which is why many pension funds also invest in forests.That being said, it is important to us that you understand the risks involved when investing.
The value of the assets backing your investment may decline. Despite best efforts and due diligence, natural disasters may strike, damaging or destroying trees. The price of timber or land may also go down.
However, sustainable forestry is an attractive asset class because it provides the optionality to delay harvest until a more favourable point in the timber price cycle.
We can generally predict and forecast when we’ll perform forest thinnings and generate revenue from the sale of timber. However the income received will still be dependent on prevailing prices as well as the yield and quality from the trees themselves. We can therefore estimate a range of expected returns, but this is not guaranteed.
The cost of management of forests in the portfolio may also increase unexpectedly at times due to various factors, and this will have an impact on the aggregated net harvest income that is available for reinvestment.
The best growth, returns and impact opportunities are in emerging and frontier markets, but these come with commensurate risks, for example political instability, issues with private property rights and currency volatility.
While we perform extensive due diligence on the forest assets that we acquire in any market, the size and diversity of the portfolio as a whole mitigates these risks on aggregate.
The liquidity of your investment is a function of a critical mass of the number of buyers and sellers for any given token, at any point in time. This liquidity will be enhanced over time as more investors hear about our work and actively trade on our platform.
We are also looking into further enhancements to provide liquidity including peer-to-peer payment options, institutional liquidity providers, and algorithmic trading engines and more.
Announcing EKO tokens. Institutional grade forestry-backed investment.