GREEN-FINGERED folk who invested in British forests over the past decade did better, on average, than those who planted their cash in more obvious places, such as stocks and bonds. According to the IPD UK Annual Forestry Index, a sample of 133 commercial forests in Britain, forests returned 18.4% last year and have averaged a staggering 21% a year since 2010, easily outgrowing the FTSE 100 share index (which returned an average of 7.7%) and commercial property (which made 10.9%).

Why the lush returns? For one, timber prices are on the up, making the land used to grow trees more valuable too. Though an irregular source of income (your average tree needs 30-odd years to grow), timber sales alone account for returns of around 2-4% a year, according to MSCI, an equity-index firm. But the root of the forestry boom is overwhelming demand from investors who want to get their hands on land, says Mark Weedon, MSCI’s head of alternative investments. Most private forests belong to wealthy families who want safe places to store their capital, alternative sources of income as interest rates remain low and who (especially since the financial crisis) prize assets they can touch and sniff over paper promises.

Forests also enjoy overgrown tax breaks: their owners pay no capital-gains tax for growing timber and no income tax for selling it. Like farmland, forests allow owners to pass on wealth without paying inheritance tax. All this has created a market in which a growing number of buyers chases a limited supply (less than half of Britain’s 3m hectares, or 7.4m acres, of forest are “investment grade”, and most rarely changes hands).

Thanks to the growing renewable-energy market and the subsidies that come with it, smart investors are now getting even more bang for their bark. The Grosvenor Estate, which owns around 2,300 hectares of forest across Britain, recently invested in biomass boilers, which turn offcuts into energy. And sawmills are getting better at using poor-quality wood, meaning less timber is wasted.