A Conversation with Gustav Wetterling, CFO and Head of IR of GreenGold

You come from the finance world rather than forestry. What drew you to GreenGold?

Yes, my background is in finance, but I have also worked extensively with natural capital and real assets. When I first looked at GreenGold, I saw a growing Pan-European company, a clear vision with a green core around a future-proof asset, a strong culture and a motivated leader. I am used to working in smaller, specialised organisations, including investment companies and private equity firms, so the lean organisation of professionals suited me well.

GreenGold had built a local presence and very strong operational teams and acquisition processes, a great business engine, which is hard to replicate, while I saw an attractive opportunity to spearhead the corporate development side, essentially helping build a great body around that engine, to use a similar analogy…

For an investor reading this who has never owned a tree in their life, and is generally unfamiliar with forestry economics, why are forests interesting as an investment?

I would point to a few things, and they build on each other. The first is biological growth, what we internally call biological interest. A forest physically grows every year, regardless of what equity markets or interest rates are doing, and even without any active management on our side it would still grow, slower, but it would grow… The trees add volume, and just as importantly, that volume moves up the value curve: a thin pulpwood stem grows into a sawlog, which is worth considerably more per cubic metre. So even in a year in which you sell nothing and prices are flat, the underlying asset has compounded. Very few asset classes give you a return that is on autopilot like that, and completely detached from markets.

The second is longevity, which translates into lower risk. The trees will be there, and wood will remain in demand, tomorrow and in 10, 20 and 30 years. This is not a sector or asset class that could disappear tomorrow, and the land beneath the trees is permanent.

Third is scarcity or finite supply, both in terms of the wood, which has long production cycles and cannot react quickly to increased demand, and also the land, which is finite. Forest returns have historically shown low correlation with stocks and bonds, and timber and land have tended to hold their real value through inflationary periods. In a portfolio, that is genuinely valuable. It is one of the reasons sophisticated endowments and pension funds have long held timberland. The underlying scarcity of the land and the optionality mechanism in trees — if you choose not to harvest and sell because prices are poor, the tree continues to grow, so you are not losing value by waiting — is what creates such a great hedge against inflationary times.

Fourth, and finally, the total return is multi-layered: biological growth, timber sales, land value appreciation and, increasingly, optional income streams such as carbon and other ecosystem services. You are not relying on a single driver.

How do you think about valuation and acquisition discipline when buying forests?

Because, in an asset with a very long duration but rather rigid return parameters, the price you pay at entry is an important determinant of your eventual return. You can influence and improve the biological growth of the trees through active management, such as thinning, good seedling material and some fertilising. However, the headline parameters — sun, precipitation and soil — cannot really be influenced. If you overpay for a forest, it takes time to repair that mistake afterwards. Acquisition discipline is therefore, for us, almost a moral position, not just a financial one.

In practice, when we conduct operational valuations for acquisitions, we use a template model. At its core, it is a discounted cash-flow exercise: we model the harvest volumes the forest will produce, the prices we expect to realise, the costs of managing and replanting, and a terminal value, and we discount all of that back at a rate generally used for European forest assets.

The subtle but important point is that, because the cash flows stretch out so far, the value is highly sensitive to the discount rate and to long-term price assumptions. A small change in either can move the answer a lot. That sensitivity is exactly why we insist on a margin of safety. We would rather miss a deal than stretch our assumptions to win it.

This is also where being evergreen and financially strong is a genuine advantage. We are not deploying a fund that has to be invested by a certain date, so we are never the desperate bidder in a hot market. We can wait for the right asset at the right price, and when markets turn and others are forced to sell, we are positioned to be the buyer rather than the seller. Discipline at the point of purchase, for the right assets, in the right jurisdictions, repeated over many years, is what produces the track record.

Let me push on something topical. We are living through an extraordinary moment for artificial intelligence and intangible, technology-driven value. Why, in that environment, is owning a hard, physical asset like a forest interesting?

It is a question I find genuinely fascinating, and I think the AI era actually strengthens the case for real assets rather than weakening it. A great deal of value today is being created in things that are intangible, infinitely reproducible and, to be honest, quite hard to value with confidence, because competitive moats and unique selling propositions that were true yesterday may not be true tomorrow. A forest is the opposite. It is finite, physical and scarce. You cannot write a line of code that conjures up another hundred thousand hectares of productive forestland. The supply of land is fixed; in fact, productive land is under pressure from many competing uses. Scarcity is the whole point.

There is also a hedging logic. When so much capital and so much valuation is concentrated in one technological theme, there is real portfolio value in owning something whose worth does not depend on that theme playing out, and which holds its value through monetary cycles. Hard assets with intrinsic cash flows are, historically, what investors reach for when they want ballast against both disruption and debasement.

And here is the part I like most: we are not on the losing side of AI and new technology; we are users of it. AI, satellite imagery, drones and sensors are making us dramatically more efficient at monitoring, modelling and planning across our forests. They will allow us to manage far larger areas per employee. So we capture the productivity upside of the technology while owning an asset that the technology cannot replicate. Software does not grow trees. That asymmetry is, to me, one of the most interesting things about this business right now.

GreenGold has a very large presence in Romania. From a pure risk-and-return standpoint, why is that interesting?

Romania is one of the best risk-adjusted return cases in European forestry, and the reason is essentially a convergence story. You have an asset — productive, well-stocked forest with strong biological growth and a healthy mix of hardwood and softwood — inside the European Union, one of Europe’s most modern wood industries and large average property size but historically priced at a discount to comparable assets in Western Europe because of perceived governance and country risk. As that perceived risk has fallen, that discount has been narrowing. Owning quality assets while that convergence plays out is a powerful place to be.

The risk side of the equation has also improved markedly. The old concerns — illegal logging, theft and uncertain property rights — have largely been addressed. Romania today operates one of the strictest timber-traceability and logging-monitoring systems in Europe. The country has fully joined the Schengen Area, is progressing through the OECD accession process, is investing heavily in infrastructure and benefits from EU structural support. Each of those developments lowers the country-risk premium that sits in our discount rate, which, all else equal, raises the value of the assets we already own there.

We were early and disciplined enough to build real scale. We are the second-largest private forest owner in the country, after IKEA. That scale is itself an advantage in costs and in sourcing future deals.

So the way I would frame it for an investor is this: you are being paid an emerging-market-style risk premium on an asset that is, in every fundamental sense, a core European one, and the gap between those two things has been closing in our favor, but there is still more value to come.

Many investors associate optimal shareholder returns with some form of debt. Why does GreenGold run its balance sheet debt-free?

It has been a historical philosophy of the Company to operate without leverage. Debt introduces fixed obligations and refinancing dates into an asset whose logic, as discussed, is patience and flexibility. The moment you are over-leveraged, you lose the very thing that makes forestry attractive: the ability to avoid becoming a forced seller, to leave trees standing through a weak market and to be opportunistic when others are distressed.

That said, I believe a conservative level of debt, used wisely to grow the asset base, can be a good lever to increase return on equity. Today, we are a much larger and more diversified company than before, which means the core business is already much more stable and predictable. We have also developed the reporting and monitoring routines that introduce additional control and stability. We are therefore examining very conservative debt options that would never compromise our resilience, which is a return strategy in its own right.

The company has signalled interest in a potential IPO. From the CFO’s chair, what does a listing mean, and what is the challenge?

A listing would broaden our capital base, give us a transparent currency for future acquisitions and create the first genuinely pure-play, pan-European listed forestland vehicle — an exposure that simply does not exist in public markets today. There is real investor appetite for that, so it would also be an opportunity to raise more capital to continue to grow.

The honest challenge is one of translation. Public markets, especially lately, can be short-sighted and impatient, chasing high risk in the expectation of getting rich quickly. That creates volatility and boom-bust cycles in individual stocks and sectors. Our asset is the opposite. It is a relatively stable-value asset, with steady compounding returns over decades.

Listed real-asset vehicles can trade at a discount to asset values when markets are nervous, and the hypothetical variations in our cash flows, both within and across years, can be hard for a quarterly-minded investor to digest. A large part of my job around any listing is therefore education: helping the market understand that the long-term, biological nature of this asset is not a weakness to be discounted, but the source of its stability and return.

In an IPO, it will also be important to attract the right investors, for whom it matters that the company and its value will be there not only in six months, but in two years, five years, and beyond, rather than some high-risk, short term AI bet on an eventuality for outsized returns. We will only go public when we are confident that we can tell that story clearly, on our own terms, and with the right new anchor additions to our shareholder base.

We have benchmarked several European exchanges, but concluded that at least for GreenGold Nasdaq Stockholm main market is the best fit for a future listing.

You operate across seven countries and several currencies. How do you think about that financial complexity?

I think of it mostly as diversification rather than complexity. Seven countries — Scotland, Sweden, Finland, Estonia, Latvia, Lithuania and Romania — means seven sets of timber markets, weather patterns and local cycles that do not move in lockstep. A poor year in one geography is often offset elsewhere. That spreads risk in a way a single-country owner simply cannot match, and it is one of the quieter reasons our returns have been so stable.

We have exposure to different currencies within the Group, including EUR, SEK and GBP. Our general approach is to keep things natural and simple: we tend to fund and incur costs locally, in the same currency as the revenues of that operation, so the exposure is largely self-hedging. We are long-term holders, not currency speculators, and the bulk of our exposure sits within the European economic sphere. We monitor it carefully, but we do not let the tail of short-term currency movements wag the dog of a decades-long forestry investment.

What are the main risks and challenges of the business from a financial point of view?

Besides the larger geopolitical risks, the main risks are biological and weather-related, together with timber-market risk. These are, of course, external factors that we cannot completely control. But as I explained in the previous question, diversification is the key mitigator.

For all the benefits we see in forest assets, raising capital in the private environment, particularly in the age of AI, has also been somewhat challenging. That is why clear communication matters: investors need to understand both the resilience of the asset class and the patience required to capture its full value.

Finally, what keeps you motivated in the role?

It’s the sense that our work has permanence, we’re building a strong public company that could be managing these forests for a very long time, it is a special feeling being stewards of a living ecosystem.