Tropical hardwoods offer a high return on investment because there is a huge demand. World consumption has multiplied nearly 25 times in the last 4 decades and more than 100 billion board feet of tropical hardwoods are now being consumed each year.

The investor buys trees and leases part of a tree plantation for which they hold the leasehold title to the land. The forestry management company will contact the investor several months prior to their trees reaching maturity so that the investor can decide at which point they wish to harvest their trees and sell the timber. The investor receives the profit of the value of the timber from their trees.

Teak trees' growth period for a mature harvest is 18 years, with thinning taking place at regular intervals. The trees that are harvested will be replaced by new ones on the same land so creating sustainable forests for generations to come.

The world's tropical rainforests are being destroyed at the rate of 35 to 50 million acres each year to supply commercial timber. Only 1% of commercial timber, including tropical hardwoods such as teak, currently comes from sources other than rainforests. Each second a piece of rainforest the size of a football pitch is lost forever. The Food and Agriculture Organisation (FAO) estimates that each year about 13 million hectares of the world's forests are lost due to deforestation. From 2000 to 2005 the net forest loss was 125 square miles per day. At this rate there will be very little tropical rainforest left in 30 years. Teak trees are being illegally felled in the natural rainforests and to find one tree of high value may result in huge areas being felled.

The cultured tropical hardwoods planted will help reduce the pressure of deforestation on the world's natural rainforests, as well as providing a sustainable source of commercial timber, because the plantations are replanted after harvesting.

How it works: The minimum investment is £10,000 which buys 300 teak trees.

When the investor purchases their trees the saplings are planted and nurtured by expert foresters who will also provide the investor with an annual report detailing the conditions of their trees and explaining the options as appropriate. For instance teak trees need thinning to make more room for the stronger trees; the harvested timber from the thinning will be sold and the investor receives a payment at years 4/5 and every 3 years until the final harvest.

The investor can choose to sell their investment at any time and will receive the current market value of the trees according to an independent valuation of the timber.

Fees: The forestry company charges a fee for growing the trees, which includes the cost of acquiring and maintaining the land that the trees are planted on and the ongoing maintenance and the harvest of the trees.

Under Maintenance costs: The annual maintenance cost is 3% of the purchase price each year for the first 5 years at which time the maintenance becomes self-funding.

"Managing emissions is one of the fastest growing segments in financial services - carbon will be the world's biggest commodity market and could become the world's biggest market overall." - Louis Redshaw, Head of Environmental Markets, Barclays Capital

Reason enough to seriously consider carbon credits as a viable investment product. Add a 3 year guaranteed 12% return and the opportunity becomes even more attractive.

What are carbon credits?

Carbon credits are a key component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHG). 1 carbon credit is equal to 1 tonne of carbon dioxide (CO2). CO2 is believed to be the most significant GHG contributing to global warming.

We all contribute to our current GHG problems. Every time you use your car, heat your home or boil the kettle more CO2 is released and adds to the problem. Part of the solution is for concerned individuals and companies to take action to both reduce our GHG emisions and to use carbon credits to offset those which we can't avoid.

You can offset these emissions by buying carbon credits that are invested in renewable energy projects, in reforestation or in some other activity that results in a net reduction in atmospheric CO2. For every 1 tonne of CO2 you or your business produces, 1 tonne is saved somewhere else in the world. If you buy enough carbon credits you can offset all your emissions and effectively become carbon neutral.

For businesses, as well as enhancing your brand reputation, reducing your carbon footprint can bring real commercial benefit and financial savings. It helps prepare you for future environmental legislation whilst staying ahead of your competitors. More importantly, it resonates with today's discerning consumers who are increasingly opting to deal with only the most responsible companies and those with an upstanding Corporate Social Responsibility programme.

Governments, international institutions and private companies have devised a trading system to enable organisations to pay for emission reductions elsewhere. Using this system, companies can buy carbon credits to offset some of their unavoidable emissions.

How it works: Theoriginal investment is a one off minimum payment of £25,000 for which you would receive 1,000 Verified Emission Reduction (VER) carbon credits per annum, for 50 years, totalling 50,000 credits during the 50 year term. This works out at only 50 pence per credit guaranteed. For the first 3 years the sale of your carbon credits will be managed for you on the carbon market and will guarantee you a return of 12% each year, on the sum invested. This is paid to you on a monthly basis.

If the average price of carbon credits was only £3 for the following 22 years, your 25 year return would be 12% per annum with a further 25 years of returns to come. The average price of VER carbon credits as of 10th June 2009 was £11.18. Should this value remain unchanged during the 22 year period, the annual return on investment would be an incredible 44%.

Kyoto: There is a strong possibility that projects such as these may qualify to join those carbon saving mechanisms that are recognised under the Kyoto Protocol from 2012. If this should happen, each of the VERs issued would become Certified Emission Reduction (CER) carbon credits which are valued at a far higher price, around £15 - £20/tCO2e at today's carbon prices. You, however, would have secured your credits at 50p each. This would create a significant increase in the annual returns.

As an indication of the strength of carbon credits as an investment product, the total global market grew from US$8.3 billion in 2005 to US$120.2 billion in 2008.

As more and more individuals and institutions accept the need for more ethical and eco-friendly investment strategies, the carbon credit market offers the opportunity to satisfy that need with a low risk, high return product.