A near natural forest that sequesters carbon and increases biodiversity

Forests have a major impact on the climate and absorb significant amounts of CO2 in their life span. This makes them an important player in the fight against climate change. In addition, forests are habitats for numerous species of flora and fauna alike and contribute significantly to soil quality. Humans have a considerable influence on these qualities through the way forests are managed.

Climate Forest has developed a model where forests are transformed back into a close to natural forest and no clear felling. The forest consists of various native wood species: white cedar, red spruce, and balsam fir as the main tree species, and additionally, eastern hemlock, Weymouth pine, and red pine, yellow, white, and gray birch, as well as various maple species.

The forest in New Brunswick, Canada follows the idea "to let the forests grow old". Only minimal interruption is used during the management process, achieving a near natural status. The commercial harvesting of timber is limited to "thinning" which allows the forest to grow significantly older than 40 years and hence - as the usual felling of trees is omitted - binding the CO2 within the trees.

Like this, Climate Forest is creating a layered forest that grows and develops over decades and as such which will provide habitats for a greater variety of plants and animals. Meanwhile the thereby sequestered CO2 allows the generation of Voluntary Carbon Offsets in form of CO2-certificates.

Our conservation forest in Canada offers an expected gross return of 7.40% that is generated by the lease income from our partner as well as an agreed sales premium at the end of the bond term.

The underlying profit generated by our partner Climate Forest is based on 3 main sources:

1. Commercial thinning and timber sales serve as the foundational income source

2. The sale of Carbon Certificates in the voluntary market contributes significantly. The carbon absorption is measured using the innovative LiDAR technology (3D scan of the forest's biomass), to create the most accurate and objective view of the impact.

3. Additionally, modest revenues are generated through income from recreational licenses.

Your investment goes towards Ridge One GmbH, which has purchased an existing part of the land and forest that is currently owned by our partner, Climate Forest Canada. This asset will immediately be leased back to Climate Forest at a fixed yearly rate of 6% and a guaranteed buy back after ten years (20% premium).

An investment of €25,000 in April 2024 will have an expected cash payout from lease income of €15.000 (6% lease) for the duration of 10 years. At the same time, a total management fee of €3.375 is payable (€338 per annum). Adding an estimated €6.500 sales premium at the end of the 10 years cycle means that the value of the investment is expected to be €51.500. This represents a Net IRR of 6.16%

Timber is an attractive investment asset for several reasons:

1. Diversification: Timber can serve as a diversification tool in an investment portfolio. Its returns do not always correlate with those of traditional financial assets like stocks and bonds, which can help reduce overall portfolio risk. Modern portfolio theory suggests that up to 10% of natural assets in your portfolio reduced the overall portfolio risk.

2. Inflation Hedge: Timber has historically acted as a hedge against inflation. As the cost of goods and services rises, the value of timberland often appreciates, providing a potential safeguard against the eroding purchasing power of money.

3. Steady Returns: Timber investments can yield relatively stable and predictable returns over the long term. Trees continue to grow and appreciate in value as they mature, which can provide consistent income when properly managed.

4. Tangibility: Timber is a tangible asset. Investors own physical land and trees, which can provide a sense of security and ownership.

5. Environmental Considerations: All of our timber investments align with environmental and sustainability goals. Sustainable forestry practices contribute to carbon sequestration and biodiversity conservation.

Investing in project that aim for a (partial) revenue from carbon sequestration has various benefits:

1. Environmental Impact: Carbon sequestration projects play a crucial role in mitigating climate change by reducing the concentration of CO2 in the atmosphere, thus helping to combat global warming and its associated effects.

2. Financial Returns: All of our carbon sequestration projects generate revenue through carbon offset credits offering a financial returns to investors on top of the underlying asset class.

3. Diversification: Carbon sequestration investments diversify a portfolio by providing exposure to a unique asset class with potentially uncorrelated returns compared to traditional investments or assets.

4. Sustainability and ESG Alignment: Investing in carbon sequestration aligns with environmental, social, and governance (ESG) goals. Our carefull selection and auditing of projects make it an investment appealing to socially responsible investors and organizations committed to sustainability.

5. Long-Term Value: Carbon sequestration assets, such as reforestation or conservation projects can appreciate in value over time, offering long-term investment potential.

Our forest in Midway is precisely recorded with the help of a laser scanner technology, which records the trees’ biomass, including the crown and leaves, at various points in the forest. This provides us with a very precise, three-dimensional image of the forest. By repeating these scans regularly, the forest’s development can be accurately traced over time.

Once the recording is done, the CO2 storage capacity of the forests is calculated. This is done on the basis of the internationally recognized specifications of the United Nations Intergovernmental Panel on Climate Change (IPCC). By running through various scenarios, we can then decide on the best possible management method to store as much CO2 as possible in the forest in the future.

The CO2 certificates are then generated exclusively from the CO2 sink performance that exceeds that which the forest would have had without improved management. This means that we only count the additional sink capacity of the forest generated by the near-natural management. description

Your investment goes towards a lease back model, in which Ridge Invest ONE GmbH purchases an existing portion of land and forest owned by Climate Forest Canada, part of the Waldholz Group. This land and forest will then get leased back to Climate Forest for a yearly fee and a predefined buy back after 10 years. (Please refer to “The Returns” section)

Benefiting from extensive experience and a substantial asset base exceeding €100 million under management, our partner, Climate Forest, adeptly mitigates the risks associated with potential challenges in meeting payment obligations. These challenges may arise from factors such as harvest losses or fluctuations in market prices.

As a natural asset, this investment is exposed to typical external and environmental risks. However, the geographical location, a diverse mix of 14 tree species, and comprehensive insurance coverage significantly curtail the impact of natural disasters or pest-related issues.

Your investment involves a bond issued by Ridge Invest One GmbH, with the bond proceeds reserved for the acquisition of 1,600 hectares of near-natural forest in New Brunswick, Canada.

This bond adheres to German regulatory standards, ensuring compliance and oversight. To optimize efficiency and maintain low management fees, we leverage two innovative approaches:

E-Securities: In 2021, the German regulator introduced e-securities, enabling the issuance of bearer bonds. Fully regulated and supervised in a Central Securities Register, e-securities provide a secure and efficient framework for modern financial products. For further insights, refer to BaFin's expert article here.

Tokenization: We tokenize the asset and store it on the decentralized polygon blockchain to facilitate the storage, allocation, and exchange of all our financial products, including bonds. This approach is fully regulated in Germany, ensuring safety, trust, and exceptional efficiency at an affordable cost.

As an investor in the Ridge Invest ONE GmbH bond, you'll benefit from the typical features of this investment class, including regular interest payments (6% per annum, paid twice a year), payback at the bond term's conclusion (with a 20% premium), and the flexibility to trade or sell the bond.

This translates to an anticipated annualized gross return on investment of 7.40% over a 10-year period.