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Josh Cohn ‘GreenWorld BVI’ interview

These days more and more investors are looking for green investments so they can make money whilst protecting the planet at the same time. Trading Diary talked to Josh Cohn the founder of green alternative investment firm GreenWorld BVI.

What is GreenWorld (BVI)?

Josh Cohn GreenWorld BVIGreenWorld BVI are a boutique green alternative investments firm. We offer investments in such areas as farmland, forestry, renewable energy and carbon credits. All of the investments we offer are actual direct investments in projects. Just to take one example, we have a farmland investment project in Africa in which the investor actually owns a piece of farmland directly and receives income from the sale of crops as well as any increase in the capital value of the land. Likewise, with our timber investments, the investor actually owns a plot of forestry and all of the trees located on it, and is entitled to receive all of the income from the sale of the timber from the trees.

Another salient fact about GreenWorld is that all of our projects are targeted at retail investors. The minimum investment requirement in our projects starts as low as GBP1,950, and none of the projects require a minimum of more than GBP20,000. Since all of these projects are targeted at individual investors, they are all “passive investments”. That is, the investor is not required to actually become a farmer or hire a firm to sell the crop, since everything is done for them.

Why did you set up GreenWorld?

I set up GreenWorld BVI first because I am passionate about green and alternative investments. I actually made a number of green investments myself about two years ago, primarily in farmland and forestry, and I became fascinated by this whole asset class.

Furthermore, I also am quite keen to make individual retail investors aware of the fact these types of investment opportunities are available to them. I am of the personal opinion that stock brokers and investment advisers generally point people to only two asset classes, stocks and bonds, and hence small investors are missing a wonderful opportunity to add some diversification to their portfolios. If you work with a stock-broker, needless to say he or she will be suggesting investments in shares, and I am determined to make the “little guy” aware that there are other options out there.

Why is GreenWorld registered in the British Virgin Isles?

Candidly, there is not a hugely complicated reason for this. Many if not most investment firms are registered offshore just for simplicities sake, and the BVI makes it very easy to register a new company. Plus, the URL “greenworld.com” was already taken, so just by adding BVI I was able to obtain the type of URL I wanted! Pedestrian reasons I suppose, but nonetheless true.

Why should people put money into green alternative investments?

Alternative investment products are those outside of the traditional investments of stocks, bonds, insurance or cash. Alternative investments generally are not influenced by the same things that affect the performance of stocks or bonds, and therefore their return is not correlated to stocks and bonds. Many people do not understand that diversification means that all of an investor’s assets do not move in lockstep with one-another, and so whilst they may think they are diversified because they own many different shares, in reality – as we saw in 2008 – all types of shares have become increasingly correlated with each other and so investors must look for more creative ways to add non-correlated assets to their portfolios. So, even for those who may not be interested to investment with GreenWorld per-se, I am more than happy to at least educate them on the existence of alternative investments they will not hear about from atraditional advisers.

Furthermore, many of the investments GreenWorld offers – especially in farmland – provide high current income from the yearly sale of crops. Given the rock-bottom interest rates and hence very low returns available from traditional savings accounts, the type of investment opportunities that GreenWorld offers allow investors to obtain the current income many crave. In addition, I believe that we are only about half-way through what many are calling a “global commodities supercycle” where commodities will continue to remain high in price and rise over time. This is being driven by the rapid growth in emerging markets, especially China, and our investments are a wonderful way to play this trend. Again, taking agriculture as an example, one could certainly invest into an agricultural commodities ETF that tracks the price of a basket of agriculture, but these types of commodity ETFs in our view are heavily influenced by financial speculation, and may not truly reflect the long-term trends in the ag sector.

What types of green investments do your deal with?

We offer five types of investments:

  1. Farmland
  2. Forestry
  3. Renewable Energy
  4. Carbon Credits
  5. International hotel properties in Morocco and Slovenia

Again, all of these investments are targeted at retail investors, and they are all “passive investments” which require no ongoing effort by the investor. Most of them also pay current income as well, sometimes quite high. I suppose it would be fair to add that the hotel investments are not I guess what one would consider truly “green”, but they are interesting nonetheless. They involve partial ownership of a boutique hotel room in either Marrakesh, Morocco or Slovenia with the investor entitled to receive a portion of the cash-flow from guests who stay there. The investment guarantees 8pc per year for the first three years, and also involves a lifestyle component as the investor is allowed one free week per year stay at their hotel.

Why are farmland investments popular?

Good question, as these are by far the investments we receive the most queries on. Farmland investments are a wonderful way to capitalize on one of the post powerful global trends in existence – the ongoing surge in food prices. As the United Nations Food and Agriculture Organization notes, as the world’s population climbs to 9 billion by 2050, an additional 6 million hectares of new farmland investment is needed every year to prevent food supply crises. Unfortunately, the amount of arable farmland globally is actually shrinking due to development, desertification and climate change, which means that the supply/demand factor is very much in favor of investors in this sector.

In addition to the supply/demand case, there are a number of other specific factors that make farmland investments attractive:

1. Inflation Hedging – Farmland has historically been an incredibly strong hedge against inflation. Unlike gold, however, farmland investments pay a yearly dividend from the sale of crops, in addition to the long-term capital gains on offer. Farmland is a tangible, real asset with a substantial underlying value for human use.

2. Diversification and Lower Risk – Farmland investments have a very low correlation to stocks and bonds therebye lowering overall portfolio risk.

3. Fantastic returns – The returns from farmland investments on a historical basis have been phenomenal. Over the last 10 years, farmland has returned approximately 13% per annum in the UK according to Investment Property Databank (IPD). In the United States, the return is similar at nearly 14% per annum based on data from the National Council of Real Estate Fiduciaries. Finally, if one considers farmland investments internationally, taking African farmland as an example, the returns have the potential to be even higher based on the low purchase price of farmland in Africa. Just as a specific example, GreenWorld BVI’s African farmland investment African farmland investment recently paid an initial dividend of 16.2% whilst the capital gain has already been nearly 30% in just the last year since the land was put into productive use.

Likewise, we believe Australian farmland to be one of the most amazing but unknown investments on the planet. Consider the statistics below:

  • Average Price of quality Farmland in England: Over £6,000/Approximately US$9,300
  • Average Price of quality Farmland in America: Approximately US$10,000
  • Average price of farmland in GreenWorld’s project in the western Australian wheatbelt: Approximately US$600

This Australian farmland project yields less due to the dryer climate in Australia, but nowhere close to the 15-20 times less which is what it is priced at! According to an article in the Australian press, there is approximately US$1.6 billion that will be flowing into Australian farmland imminently. The three investors putting money into Australian farmland are a UK fund that is putting in US$400 million; legendary commodities investor Jim Rogers who is using a rural land fund that has US$600 million into the pipeline; and an Australian government pension fund called called Future Fund. That is US$1.6 billion in high-end institutional money ready to go! I do not wish to push people in any particular direction, but of all of the investments that GreenWorld offers, I must admit that I am most partial to the African and Australian farmland investments.

If someone invests in farmland what do they actually get?

In the farmland projects, our development partners purchase large tracts of farmland. This farmland is then offered to individual investors in increments ranging from as little as one acre in our African and European projects, and 50 acres in the Australian project. The key point here is that the investor receives direct ownership of a plot of farmland, and a portion from the sale of crops which constitutes the investor’s yearly income yield. Therefore, it is important to emphasize that these are NOT financial funds of any sort, but actually investments in the direct asset itself. Investors also are entitled to any increase in the capital value of the land. Investors are free to sell their farmland at any time, which is one way they could cash out, whilst we also believe that one or more of these farmland investments will ultimately be acquired by giant institutional investors. Either way, in addition to the yearly income, we believe there are also very attractive capital gains on offer as well.

What kind of risks come with green investing?

As with any investment, there are certainly some risks investors should be aware of, so allow me to list the two main ones below.

1) First, the types of investments we are offering are inherently “illiquid”. These are not the type of point and click investments you may be used to doing from your brokerage account. I would say that any of the investments are meant to be held for at least two-three years, and some such as the forestry and farmland investments for at least several years. Therefore, the risk is that if an investor suddenly needs money, he or she will not be able to just log-onto their computer one morning and just sell the whole lot.

2) The second risk has to do with the underlying price of the commodities themselves. For example, currently the price of the grain commodities such as wheat and rice are quite high and we do expect them to remain so. Likewise, the market for bamboo is projected to double in value over the next five years, but of course no guarantee – as the old saying goes, “past performance is not a guarantee of future results,” and it is not impossible that some unknown factor may result in the prices of these commodities falling which of course would reduce the yearly income yield and capital value increase of your investment.

How can green investments be made tax efficient?

In general, there is a good argument for putting income generating investments in a tax-advantaged structure such as a SIPP (and all of GreenWorld’s investments are SIPP-eligible by the way). By the same token, the actual tax issues involved are not overly complicated as the yearly income would simply be taxed at the same rate as income from savings accounts, whilst the capital value increase in the asset being sold would be treated no differently than the increase in value when one sells a stock. So, whilst it is fair to say that ideal mechanism for purchasing these types of investments are through a tax-advantaged structure such as a SIPP, the actual tax treatment of these investments is not overly complicated.

Any final words of advice?

Definitely. First, as the old saying goes “all things in moderation,” and this applies to our types of investments as well. We would recommend that individuals put no more than 15 – 20pc of a portfolio into investments of the type that GreenWorld offers. I believe that our investments can add diversity to your portfolio, but they are not meant to be a dominant part.

Second, consider what I noted above, that these investments are illiquid. Do not invest with money that you may suddenly need access to in the short-term. If I ever were to talk to a client in which I discovered this to be the case, I would for their own protection simply not consider it appropriate to work with them just for their own protection.

You can find more about GreenWorld BVI on their website at http://www.greenworldbvi.com/.


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