John Bourbon and John Mudge, directors of the Quadris Environmental Forestry Fund, explain to Alex Blackburne how they, along with the fund’s many investors, have been inspired by the Brazilian teak plantation that the fund invests in.
“When they come out of the laboratories, the seedlings start off as big as the tip of your fingernail“, explains John Bourbon.
“To watch them grow into something which, four weeks on, is about four inches tall, and then a couple of weeks after that it’s six inches, has a proper root system and leaves on the top of it, and then to think that in four or five years’ time, the thing is 12 to18 feet tall, is just incredible.”
The Quadris chairman, and director of the company’s Environmental Forestry Fund, is referring to the process undertaken at Floresteca’s Brazilian plantations, where up to four and a half million teak seedlings are collectively planted each year.
Teak is renowned for being one of the strongest, most durable and weather-resistant types of wood in the world, whilst also being one of the most easily adaptable, making it almost perfect for indoor and outdoor furniture. Floresteca, whose plantations cover over 100,000 hectares in Brazil, are the world leaders in producing it.
“To go into the plantations, it’s like looking at a stand of Grenadier Guards“, Bourbon continues.
“You just look down a line of trees and you can see how perfectly formed they are.
“It grabs you, and everybody that’s involved with it and is touched by it invariably comes to the same conclusion – it’s quite amazing.”
Quadris, which is based in Douglas, the capital of the Isle of Man, originally set up its Environmental Forestry Fund in 2001. And unlike the two previous focuses in this series – WHEB AM’s Sustainability Fund and Kames Capital’s Ethical Equity Fund – its sole investment is in Floresteca, the largest privately owned forestry company in South America.
“All their plantations are certified by the Forestry Stewardship Council, and they are very, very strong on ethics and sustainability, which is why we invest in them“, says John Mudge, also one of the fund’s directors.
“There is such demand for teak; the indigenous teak forests, predominantly in Burma, have been decimated, and it’s now very tightly controlled.
“What Floresteca have done is basically converted scrubland in Brazil to productive, sustainable plantations.
“They employ local people, support local communities, have their own charity – the Floresteca Foundation – which builds medical facilities, schools, and villages and so on, and they look after their workforce. It’s all quite uplifting.”
The Environmental Forestry Fund was set up in 2001, and is currently worth £105m. Mudge is keen to convey the fund’s impressive performance statistics.
“The US dollar variable is the best class to look at because the assets are valued at US dollars, therefore the anomalies caused by exchange rate fluctuation are stripped out”, he says.
“The three year performance growth has been 25.57%, and two years has been 15.13%.”
A reoccurring myth surrounding ethical investment funds is that an investor must sacrifice performance for their morals or ethics – a point that countless IFAs and fund managers have dispelled on Blue & Green Tomorrow.
Mudge is another one to join that list.
“Just look at our track record“, he responds, completely justifiably.
This misconception that industry representatives are continuing to drive out makes you wonder where and how it all started.
Both Bourbon and Mudge have been out to Brazil to experience the Floresteca plantations for themselves, and state that the whole buzz surrounding the project is inspiring.
“One of the things that has really surprised me about the fund is that everyone that comes into contact with it becomes passionate about it“, explains Mudge, who has been at Quadris for five or six years.
“The number of people who really believe in what Floresteca are doing and what the fund is trying to achieve is absolutely fantastic – as is the whole ethic.”
Bourbon, who has been involved for 18 months, echoed his colleague’s attitude.
“The fund grabbed me as well“, he says, “it just does“.
“It’s just an incredible thing when you think about what’s going on – the growth of all this wood which is obviously desperately needed, particularly in hotter climates for building and the like, where hard wood such as teak is in desperately short supply.
“To think that we’re growing it in a sustainable way, whilst putting back loads of oxygen into the atmosphere, and employing about a thousand people at Floresteca in Brazil, you get a very warm feeling and you just believe very quickly in the fund and what it can achieve.”
Looking to the future, things look bright for the Quadris Environmental Forestry Fund, with a possible endless stream of teak production on the horizon, meaning it is entirely flexible over how and when they reap its financial rewards.
“The great thing is, teak grows“, says Mudge.
“Yes, there will always be some market volatility in the teak price, but as the asset grows close to maturity, if the price of teak is depressed, we can leave it in the ground, and it continues to grow, get bigger, and become more valuable.
“We also have the option if the price is much higher, to probably sell the teak forward to take advantage of that.
“You have flexibility, as long as people are willing to accept the long term nature of the underlying investment.”
The Quadris Environmental Forestry Fund is an entirely refreshing investment. It is ideal for specialist investors who are passionate about forestry and sustainable assets, although it should be noted that, at present, there are some restrictions on new subscriptions to the fund.
The nature of the fund is almost completely unique in that it invests in teak, which in Floresteca’s cycle, takes about 22 years to grow.
Therefore, as with most ethical funds, it’s not an investment for short term gain, but instead, provides financial security in the long term, whilst also helping our beautiful Earth to breathe. And that, for want of a better cliché, is priceless.
If you would like to find out more about the Quadris Environmental Forestry Fund, visit their website, and to explore Floresteca’s work in more detail, visit their’s too. Alternatively, if you would like to invest in such sustainable or ethical funds, contact your financial adviser, if you have one, or complete our online form, and we’ll connect you to a specialist ethical adviser.