Alternative Investments Motivated by Sustainability Values

When investors go online to research sustainable investing opportunities, or indeed have a conversation with most financial advisors, they are usually introduced to the world of ESG investment funds. The theme of sustainable or ESG investing has seen explosive growth in popularity in recent years.

These collective investment funds come in many different styles and colours under the theme of increasing social and environmental positive impact. There is a fund out there for everyone, depending on the priorities sought by the investor.

But what if you want something that’s a little more personal?

The concept of personal investments is using one’s savings to make direct investment into projects personally, rather than via a collective investment fund.

Unlike packaged collective funds, that are easily accessed under the close guidance of a financial adviser, personal investments may take a little more work on the investor’s behalf.

Finding and establishing the investment can take more effort but if you’re looking for something more personal there are numerous investment opportunities available for you to consider.

As there are tax considerations with most investments, we strongly recommend that you seek advice from a tax professional before purchasing.

These personal sustainable investments can take the form of purchasing a farm, vineyard or forest, or purchasing some land and planting trees, in a process known as afforestation. Here we look at one option, forestry as an alternative personal investment.

Forestry Investment

Investors can purchase either existing forestry plantations or land suitable for afforestation, where investors can avail of the afforestation grant and premium scheme, and forest road grant schemes. The investor remains 100% owner of both the land and the crop.

Summary of the taxation of forestry in Ireland

• Tax-free forestry premium payable for 15 years
• Afforestation grants cover full costs of planting
• Landowner remains 100% owner of both the land and the crop
• Attractive grants for forest roads, pruning and shaping
• Potentially tax efficient regarding inheritance tax
• Income tax-free status of timber sales

Woodland Forestry Planting Incentives

Landowners who enter the scheme can qualify for an annual tax-free income, payable for 15 years. The landowner or applicant remains the full owner of the land and the timber.

Woodland Environmental Fund

The objective of the Woodland Environmental Fund is to facilitate the planting of more native woodlands within Ireland. In doing so, the fund offers an opportunity for businesses to partner with Government and private landowners in creating these diverse woodland habitats.

Funding is a once off single payment of €1,000/hectare to the landowner and will be a top up to premiums paid by the Department as part of the Native Woodland component of the Department’s Afforestation scheme.

Woodland Creation Grants

Grants cover the costs of establishing a plantation including ground preparation, plants, planting, vegetation control, fencing and four years maintenance. Therefore, it is cost free to establish and maintain a plantation.

Taxation Considerations

Forestry is taxed in the same manner as farming in Ireland. Consideration should be given to the implications and opportunities in relation to the following taxes.

• Income Tax
• Pay Related Social Insurance (PRSI)
• Universal Social Charge (USC)
• Stamp Duty
• Capital Gains Tax (CGT)
• Capital Acquisition Tax (CAT)

 

Again, we strongly recommend that you seek advice from a tax professional before purchasing.

There is an extensive range of sustainable investing opportunities available today. For the majority of investors a collective investment solution that is aligned with their own sustainability values, will be the recommended route for them.

However, the opportunities are there for investors who are seeking a sustainable investing solution that is more personal to them, once they have sufficient funds and a robust financial plan in place for their future.

Alternative personal investments can have a direct positive impact on the local environment, and provide a tangible asset that can be passed on to the next generation.