Lumbering Along
The Role of Wood in Construction Projects
What is the outlook for wood?
What is the role of wood in sustainable construction?
What should Future Positive Investors look out for when considering lumber companies?
Lumber prices have been on the rise since the start of the year. Recent weeks have seen a decline, partly attributed to sustained higher interest rates which impact borrowing costs for new construction projects. The prospects for materials remain favorable. An abundance of new construction projects will drive demand for wood, a material increasingly recognized for its sustainable properties.
Climate change adaptation, reshoring of supply chains, infrastructure upgrades and a tight housing market are all drivers of growth for the construction industry in the coming years. However, this growth comes with significant environmental challenges, particularly in terms of greenhouse gas (GHG) emissions from building materials. The use of traditional materials such as cement, steel, and petrochemical-based products dominates the sector and contributes to its carbon footprint. Switching out these materials for more emissions-friendly alternatives offers a pathway for emissions reduction.
Sustainable Building
Wood presents a compelling alternative. It is an efficient and easy material to work with, offers insulation and sound absorption, and exhibits strong electrical resistance and tensile strength. It is also a regenerative resource with the ability to capture carbon throughout its lifecycle. The carbon remains stored in the wood products during its use in construction. Additionally, wood production requires less energy, generates less wastewater, and produces fewer toxic emissions compared to steel.
While wood’s sustainability claims require careful full life-cycle analysis that account for proper management of the forests supplying the lumber, companies are increasingly incentivized to prioritize responsible forestry. Future Positive Investors should pay particular attention to companies recognized for quality forest management as this not only supports sustainable wood sourcing but the companies can also be compensated for acting as a carbon sink.
Wood-Tech
Wood faces some criticisms for its flammability and engineering strength, but technological advances are addressing these challenges. Engineered wood products such as cross-laminated timber (CLT) and Glulam beams provide increased strength and versatility, expanding the potential applications of wood in construction and making it an increasingly viable option for large-scale projects.
FINAL THOUGHTS
Sustainable building materials will be key to meeting future construction needs and emissions reduction goals. While there is still a place for traditional materials like steel, and cement (with preference for the lower emission variety), the rise of wood as a sustainable alternative presents opportunities. Future Positive Investors should watch for companies producing innovative wood products and also those companies who sustainably manage the forests that provide their lumber; these forest owners have the potential for an alternative revenue stream for their role as a carbon sink.
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