Sustainability and climate change – risks and opportunities

Our business model is based on nature-based resources, so our business activities and capital are exposed to a range of sustainability- and climate-related risks and opportunities that may affect our operations, financial performance, and cash flows. We aim to identify, assess and, where possible, quantify these risks and opportunities in order to provide a transparent and comprehensive overview to our shareholders and stakeholders.

Risk Water availability and precipitation

Our tropical natural forest properties and concessions in Brazil and Gabon are not threatened by droughts or wildfires caused by climate change in the short-term and mid-term. However, in the long term, climate change may increase the likelihood and severity of such events, potentially posing physical risks to operations. Having said this, climate change also alters traditional rainfall patterns, making rainfall less predictable in timing, frequency, and intensity. This has already had an impact on the operations in the previous years and will continue to do so in the short-term, mid-term and long-term. In daily business, mainly harvesting and logistics are affected, leading to unplanned halts. To mitigate these effects, the company adapted its operational planning and increased organizational flexibility. In Brazil, changing precipitation patterns have also affected the Amazon River’s water levels, leading to low water conditions in the fourth quarter of 2023 and 2024. Large vessels could no longer navigate the Amazon River to Manaus, which it the only river port for our operations in Brazil. Cargo had to be transshipped, leading to higher logistics costs. This low water situation did not occur in 2025. We consider this a physical risk as any long-term solutions may result in higher logistics costs, which cannot yet be quantified.

Risk Environmental regulations

New and stricter environmental and timber trade regulations for tropical timber, driven by climate change policies, represent a transitional risk for the company in the short-term to mid-term. These risks mainly arise from delays in timber deliveries caused by constantly changing requirements and lengthy authorization processes. In the current reporting period, the financial impact of these regulatory developments amounted to approximately EUR 2.95 million, of which EUR 2.75 million is allocated to delayed revenues and EUR 0.2 million to additional staff costs. The delayed revenues are expected to be realized in the following reporting periods and will therefore have only a one-time impact in the mid-term but entail significant operational disturbances.

Opportunity Demand for timber

The demand to substitute unsustainable building materials presents a physical opportunity for the company in the short-term, mid-term and long-term. It confirms that the company’s current business model of protecting tropical forests by providing sustainable building materials is future-proof. The financial impact is reflected in our positive sales forecasts, with no numbers published for competitive reasons.

Opportunity Emission compensations

Precious Woods and the Brazilian Climate Tech company BRCarbon are co-developing a REDD+ project on our forest estate in Brazil under VERRA standards, the most recognized in the market. The results of the project validation are scheduled for the end of 2026. The project represents a significant physical opportunity. If it succeeds, we can expect significant revenues from the sale of emission compensation in the mid-term. The amount of this revenue cannot yet be estimated due to the volatility of the carbon markets. Moreover, a reliable forecast of the number of credits is only possible after validation.

Opportunity Reforestation

An increasing number of companies are seeking to restore forest ecosystems affected by their operations in order to meet their climate goals. Recognizing this need, we have offered reforestation services to customers in Gabon and Brazil since 2023 and 2025, respectively. We specialize in restoring natural tropical forests and grasslands, so we not only help our customers achieve their climate goals and legal obligations but also reduce harmful erosion in their operations. Reforestation services are a growing part of our business and present a physical opportunity in the short-term, mid-term and long-term. They contributed EUR 928 600 to our 2025 revenues.

Opportunity Sustainable forest management

In addition to the above risks and opportunities, Precious Woods has voluntarily restricted its harvesting levels in Gabon to ensure sustainability. In Brazil, we always stay significantly below the legal limit of 25 m³/ha for the same reason. This voluntary restriction entails physical risks as we could face competitive disadvantages compared to companies that do not apply voluntary limits. However, it also provides a competitive advantage by allowing us to reach our environmentally sensitive main markets. Even if the financial impact of these measures cannot be quantified without significant inaccuracies, it is evident that the benefits outweigh potential losses.

m³ harvest harvested

m³ harvest per hectare

Origin of Precious Woods timber products ¹

FSC or PEFC certified: 98.35 %

In accordance with our procurement guidelines: 100 %