Our beliefs

Warning

Based on its longstanding experience in the forest and vineyard markets in France and Europe, France Valley has built up strong convictions regarding the development of these assets. They do not constitute performance targets, these outlooks are based on assumptions that may not materialize, and unexpected events may still disrupt these underlying trends.

Europe has an average afforestation rate of around 40% (with variations between 10% and 60%, covering 178 million hectares in the European Union) and a long tradition of forest management.

Source : Cartograf.fr

Timber and forests

Natural Assets, particularly forestry, are an increasingly sought-after investment for institutional investors. This asset class offers numerous advantages in terms of performance, sustainability and social impact. France Valley, a leading player in forestry investment in Europe, supports top-tier institutional players in their investment allocation.

The positive trend in this asset class is driven by underlying trends

Strongly rising demand for wood

Driven in particular by population growth and the increasing development of its use cases, wood demand is on the rise:

• Construction: the rate of use of timber frames in new homes in Europe is between 12% and 15%. It varies widely from country to country, and is growing steadily.
• Energy: wood accounts for 14% of energy production in Europe (source: Eurostat / IEA), being the main heating resource, surpassing wind power and photovoltaics. Burning pellets generates just 30 to 50 grams of CO2 per kWh, compared with 300 to 350 grams for fuel oil. What's more, sustainably managed forests offset these emissions. Public policy therefore supports the use of wood, strengthening Europe's energy independence.
• Substitution: anything made from oil can also be made from wood: textiles, plastics, packaging, screens and so on. Although not all solutions have yet been industrialized, this biodegradable and renewable material is set to gradually replace petroleum derivatives in everyday consumer products.
• Environmental services: forests are home to 70% of the world's biodiversity, regulate the water cycle through evapotranspiration from leaves and the root network, and capture 25-30% of CO2 emissions linked to human activity worldwide, according to a report by the Food and Agriculture Organization (FAO). These factors make them an increasingly strategic asset for the years to come.

Wood supply under pressure

While demand for wood is growing, its supply is facing constraints and insufficient supply. We can't build factories to manufacture wood, only forests can. A fortiori, according to United Nations figures, the world's forests are shrinking by 4.7 million hectares a year. Natural forests, which are not threatened by deforestation (particularly in France and Europe), are increasingly being protected to conserve biodiversity and mitigate climate change.

A growing need for climate and biodiversity solutions

As an asset class, natural capital such as forests has the lowest average carbon intensity of all alternative and traditional asset classes (measured by net CO2 emissions per euro invested).

Forestry investment today offers the greatest potential for generating significant environmental and climate benefits at scale. Trees can not only remove CO2 from the atmosphere, but also store it over the long term.

These characteristics are attracting the interest of institutional investors, as they become increasingly aware of climate risks and adopt positive contribution strategies in their investment portfolios. The prospect of carbon credits, a new source of revenue linked to the ecosystem services provided by forests, is further increasing investor interest.

In January 2023, the Net-Zero Asset Owner Alliance, representing over $6.5 trillion in Assets under Management, committed to a transition to carbon-neutral investment portfolios by 2050, according to the organization's latest report.

"Forestry funds are the Emerging Star of Alternative Investments. This 'Green Goldmine' is proving to be a promising avenue for long-term capital growth".

EY, Forestry Funds: The Emerging Star of Alternative Investments (2023)

Thus, although this cannot be guaranteed, France Valley anticipates a continued rise in wood prices in the face of growing demand and limited production. The value of forests, mainly determined by the stock of wood, should therefore appreciate, reinforcing their essential role for our future.

Investing in Europe with France Valley

France Valley, with over 10 years' experience, has a dynamic management approach in all the countries in which it operates. This extensive geographical coverage, in France and elsewhere in Europe, enables significant diversification and better risk mitigation:

• Optimized diversification: in terms of species, maturity, soils, climates and destination markets - enabling us to smooth performance and mitigate market risks.
• A robust, transparent legal framework: secured investment conditions in France and Europe, with clear protection of investors' rights allowing for utmost trust.
• An optimal level of control : in-depth markets knowledge, end-to-end control over forest management in conjunction with our network of partners, and geographical proximity to assets with frequent team visits.
• Mitigation of climate risks: fewer extreme weather events than in the United States and Latin America, and more consistent and diversified climate conditions in France Valley's selected countries, reducing the risk of forest fires and other natural disasters.
• Streamlined acquisition process: high agility and velocity in pan-european acquisition process, leveraging best practices across all our countries of operation.

Grapes and vines

Here again, it's the interplay of supply and demand for this raw material that influences investment performance, particularly in Champagne where France Valley has a strong presence. Global trends in Champagne consumption and exports have a direct impact on demand for grapes, affecting yields on sharecropping leases paid in kind and land values. The supply of grapes to wine merchants, who account for around 70% of shipments, is achieved in three ways: (i) by increasing the regulatory harvest volume per hectare, although this has its limits, especially in terms of preserving grape quality and complying with environmental standards; (ii) via supply contracts with harvesters and cooperatives; or (iii) by acquiring vineyards.

As far as China is concerned, growth in Champagne consumption could support the market in the long term.

Warning

This outlook is not certain, as events may postpone its realization (financial crisis, worsening relations with China, armed conflicts...), but the underlying trend also seems settled: in 2018, China accounted for around 1% of Champagne shipments, with some 1.9 million bottles shipped. At that time, total Champagne shipments worldwide were close to 300 million bottles. In 2023, total Champagne shipments will amount to 299 million bottles, with China accounting for around 2% of these shipments, or around 6 million bottles (Source: Comité Champagne). The impact of this increase in China has not yet been felt on land prices, due to the slowdown in consumption volumes in other countries, notably France and the UK.