Financial Investment Management for Forest Sustainability
Zarina Ismailova, South Dakota State UniversityFollow
Construction and Operations Management
Huitian Lu
environmental, finance, forest, investment, management, sustainability
This is paper is discussion about main problems of forest management, whether financial investment has a substantial impact on the long term perspective of forest landscape restoration and, more specifically, what strategy and what financial options are available to make the forest projects more sustainable. A few relevant questions to ask are: who are the main actors in the implementation of FLR projects; which steps have to be taken; and, which financial options would more suitable and would be feasible to implement. There are three main parts of this research to be investigated:
forest issues along with their respective solutions,
financial investment as an operational tool, and
financial mechanisms for sustainable forestry.
The description of the global problem of deforestation in the period of the end of the last century and the current time is area of interest, as well as, the influence of the deforestation on the environment and implementation of financial tools to make environmental management more sustainable. The main two subjects or themes that are going to be explored are: the problem of deforestation and the implementation of innovative financial tools to help in solving environmental issues. In recent years, interest in impact investing has grown substantially. Socially, oriented organizations are pursuing innovative financial solutions that address complex social problems. It requires great collaboration among philanthropists, government, and private investors. Financial investment is a representation of the significant and growing input of capital that can fund programs to address social or environmental problems and get effective sustainable output. While investing in the business, most investors would like to get their financial return in a short period of time. However, this tendency is gradually changing. A growing number of investors want to use their capital to make positive social and environment changes and is becoming a main stream financial approach (Rockefeller Philanthropy Advisors, 2009). This paper shows the possibility of implementation different types of methods of the real options approach to forestry investment analysis. The main objectives are to discuss the theory of real option and describe methods which can be applicable for uncertainty and managerial flexibility in forest management and investment. In addition, we will use the simulation method as a most flexible method to calculate the option values of timber contracts what could help managers of forest projects to make the proper decision. One of the main focus in current research paper is to implementation of the methodology which is applicable to value of the scale sale harvest contract. The value of a harvest contract with stochastic timber prices can be considered as expected cash flow as well as discounted profit from the forest yields at the optimal time (Petrasek & Perez- Garcia, 2010).
Sustainable forestry -- Economic aspects
Forests and forestry -- Economic aspects
Includes bibliographical references (pages 72-82)