August 10, 2023

What are “natural real estate” assets?

At WealthGreen, we’ve coined the term “natural real estate” assets to describe earth’s natural ecosystems.
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At WealthGreen, we’ve coined the term “natural real estate” assets to describe earth’s natural ecosystems.

To understand the significance what we mean by this, it's important to delve into the term "real estate". Real estate originates from the Latin word "res", meaning "thing", and "real" meaning "existing, true". In the context of WealthGreen, these natural real estate assets are real in the truest sense as they represent physical portions of the Earth.

Investing in natural real estate assets means that your investment is backed by the promise of protecting and restoring a tangible piece of the Earth. This not only includes the land itself but also the ecosystems it supports, such as forests, wetlands, and the biodiversity they contain.

Let's begin with an analogy: Imagine owning a house in a sought-after neighborhood. Instead of living in it, you decide to rent it out. People who desire to live in that neighborhood, but don't own a house, will pay you rent to occupy your property. Your house is a valuable asset, and people compensate you for the privilege of using it.

Similarly, forests and natural ecosystems serve as “natural real estate”. These aren't merely plots of land with trees; they are dynamic landscapes that actively remove carbon dioxide from the atmosphere, which is crucialin combating climate change.

At WealthGreen, we term these nature-based projects that generate carbon credits "natural real estate assets" because, in essence, companies are "paying rent" to ensure these forests remain intact. By acquiring carbon credits, corporations are compensating for the service these natural areas render in sequestering carbon – akin to tenants paying rent for a place to reside.  

Moreover, akin to real estate, location and scarcity are paramount. The amount of natural real estate, in the form of forests and other ecosystems, is finite. We can't simply conjure more forests. Conversely, demand is escalating. Companies are increasingly seeking to offset their carbon emissions to attain net-zero targets and require carbon credits for this purpose.

But there's more. Natural areas are coveted not solely for their carbon sequestration capacities but also for other activities such as mining, palm oil production, and timber harvesting. This additional demand intensifies the pressure on these natural real estate assets, rendering them even scarcer and, consequently, more valuable.

As supply dwindles and demand surges, the price of carbon credits derived from these natural real estate assets is on the rise, analogous to how rent might increase in an increasingly popular neighborhood or wherehousing is limited.Furthermore, it's essential to recognize that there are different types of natural real estate assets, which can be categorized based on the type of ecosystem and their methods of carbon sequestration:

  1. Forests and Afforestation Projects: These are perhaps the most common forms of natural real estate assets. They involve planting trees on land that has been deforested or degraded. Forests are likethe suburban houses of the natural real estate world – reliable and steady.
  2. Blue Carbon Ecosystems: This refers to carbon credits generated through the preservation of coastal ecosystems like mangroves, seagrasses, and salt marshes. These ecosystems are incredibly efficient at storing carbon. In the natural real estate analogy, think of blue carbon as the beachfront properties – limited in number but highly valuable. Their scarcity and higher carbon sequestration ability make blue carbon credits more expensive.
  3. Agroforestry and Sustainable Agriculture: These projects integrate trees into agricultural lands and practice sustainable farming methods to improve carbon sequestration. They can be seen as the community gardens and organic farms of the natural real estate market.
  4. Peatland Restoration and Conservation: Peatlands are wetlandsthat store immense amounts of carbon in their soil. Preserving and restoring them is critical. They can be seen as the luxury penthouses with extensive facilities in the natural real estate world –not very common, but highly valuable.

By investing in carbon credits from these diverse natural real estate assets, you're investing in the planet's vital capability to combat climate change. Similar to possessing real estate in a prime location, you’re owning a stake in Earth's inherent ability to purify the air, and companies are willing to pay for that increasingly scarce resource.

This new paradigm aligns profit with the planet, allowing investors to make a positive impact on the environment while potentially realizing financial gains. By reimagining the relationship between economic growth and environmental sustainability, investment in natural real estate assets can pave the way for a greener andmore prosperous future for all.

In conclusion, natural real estate assets present an innovative and sustainable investment opportunity that not only has the potential for financial returns but also contributes to the global fight against climate change. Like traditional real estate, natural real estate assets are limited in supply and can vary in value based on their type and efficacy in carbon sequestration. Through the responsible and transparent generation of carbon credits, these investments can support corporate sustainability goals, foster conservation efforts, and help drive the transition to a low-carbon economy.Remember, when investing in natural real estate assets, you’re not just owning a stake in a forest or a wetland; you're owning a piece of the planet's future, and that is a venture worth investing in.