Expanding Key Opportunities in FOrest Investments: Liquidity, Impact and Ownership through Blockchain

Project Information

EKOFOLIO

Grant agreement ID: 876676

DOI

10.3030/876676

Project closed

EC signature date 6 September 2019

Start date 1 October 2019

End date 31 December 2019

Funded under

• INDUSTRIAL LEADERSHIP - Innovation In SMEs

Total cost

€ 71 429,00

EU contribution

€ 50 000,00

Coordinated by

EKOFOLIO SARL
Luxembourg

Periodic Reporting for period 1 - EKOFOLIO (Expanding Key Opportunities in FOrest Investments: Liquidity, Impact and Ownership through Blockchain)

Reporting period: 2019-10-01 to 2019-12-31

Summary of the context and overall objectives of the project

Ekofolio is a revolutionary trading platform focused on the forestry asset class, in which large forest assets are divided into small tradable tokens (tokenisation), thus enabling small to medium investors to collectively own parts of forests. While the forests are managed and harvested in the most sustainable ways, they offer the investors stable and reliable returns between 3 to 7+% annually at low risk. The innovative trading platform is powered by the latest blockchain technology, which eliminates the need for traditional financial intermediaries (e.g. brokers), ensuring that the large majority of returns are given back to token holders. The rising global population and the increasing demand for forest products present a clear need to preserve large areas of forests and presents strong global demand for sustainably-managed forests. The overall objective of the project is to provide a detailed feasibility study including the following major specific objectives:

• Detailed market analysis of the forest investment sector identifying the relevant stakeholders and regulations
• Developing an innovative legal structure enabling the trading of our asset-backed tokens
• Assessment of the applicable technologies allowing investors to securely and reliably send tokens directly to user wallets
• Updating our IP protection strategy and freedom to operate analysis
• Revision and update of our commercial model
• Development of an updated business plan, including a viable and sustainable financial model
• Defining a preliminary project work plan

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

During the project a detailed feasibility study was developed. The main results are as follows:

• A pilot sale event was prepared and executed, where our first forest was tokenised and commercialised in October 2019 in amount of approximately €27,000. The experiences, which we learned from this action, provided a significant information base to elaborating the commercial and technical details.
• A detailed market analysis of the forest investment sector was carried out, and the major market players were identified.
• The business model was updated, the pricing and valuation strategies were revised. The environmentally conscious small and medium size investors were targeted.
• The financial feasibility was investigated and confirmed. Detailed revenue, cost, and profit calculations were performed for pessimistic, conservative, and optimistic scenarios.
• A roadmap to release our product for a wide customer base was developed.
• Our advertising and promotion strategies were revised and updated.
• The technology background including the relating standards was overviewed, the requirement specifications were updated. Ekofolio’s platform infrastructure was specified. The technical feasibility was confirmed.
• An innovative legal framework was developed establishing the contractual foundations of trading asset-backed Tree Tokens.
• Detailed freedom-to-operate (FTO) analysis was executed, the latest patent search results were summarized, the knowledge protection, and IPR strategies were formulated.
• A preliminary project plan with the main work packages and tasks was established.
• Negotiations with new, institutional-level investors were started about their specific requirements and we identified a significant interest from their side.
• Based on these recent interests, scaling-up our trading platform to meet the requirements of institutional level investors is considered, while the legal, financial and technical requirements are being assessed.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

Contrary to the state-of-the-art forest investment opportunities such as Real Estate Investment Trusts (REITs) and Exchange Traded Funds (ETFs) Ekofolio‘s approach is based on an innovative, blockchain-based technology platform and a crowdfunding mechanism. It allows small investors to access assets that were previously too expensive to purchase on their own. Exploiting the advantages of blockchain technology allows Ekofolio to bypass traditional financial intermediaries (brokers, banks, stock exchange, etc.) and their related costs, ensuring that the majority of returns from assets are given to investors. The sales contracts are electronically signed directly among the sellers and buyers then securely and immutably stored in a word-wide, distributed computer system. Ekofolio’s direct trading process is quick, flexible and inexpensive comparing to the traditional cases. As the major result of the project we expect to have a reliable feedback about the technical, financial and legal feasibility of our product.

Regarding the potential impact, forestry is increasingly being recognised as an investment that is not only profitable but also beneficial to and sustainable for the environment. Investment into forestry is a relatively stable growth, provides a hedge from inflation as the value of the forest increases in correlation with the inflation rate, thus protecting investors. Plantation forests also provide an alternative to logging of indigenous forests, whilst promoting the establishment of additional carbon sinks. Forestry has a huge positive social and environmental impact of removing carbon emissions and opens a great investment opportunity for both current and potential investors to exploit.