International Day of Forests – 21 March 2024

Sustainable Forestry forms an integral part of our natural capital strategy. Here James Bullen shares some insights and outlines our approach

On this day, the UN International Day of Forests, we are reminded that forests are often referred to as the lungs of our planet.  They play a vital role in regulating the Earth’s climate and supporting diverse ecosystems.  But they are in peril.  For years we have witnessed environmental degradation and loss of biodiversity from unsustainable forest management practices, such as deforestation and illegal logging, which exacerbates climate change.

At Climate Asset Management, sustainable forestry forms an integral part of our Natural Capital Strategy, alongside regenerative agriculture and environmental assets, as it balances economic, environmental, and social impacts.

Sustainable forestry aims to:

• promote responsible stewardship of forest resources
• ensure long-term viability while delivering environmental and social benefits
• maintain or enhance a forest’s ecological integrity, biodiversity and ecosystem services
• preserve forest ecosystems while facilitating sustainable extraction of timber and other forest products through selective logging, reforestation, and habitat restoration.

What makes sustainable forestry a compelling part of our Natural Capital Strategy is the role it can play in addressing the twin challenges of climate change and biodiversity loss.

Forests are supremely effective carbon sinks, absorbing and storing vast amounts of carbon dioxide from the atmosphere.  Sustainable forest management can enhance carbon storage, while contributing to climate change mitigation efforts by offsetting carbon emissions.

Forests are home to over 80% of the world’s terrestrial biodiversity, making them critical reservoirs of genetic diversity and a habitat for countless species.  Protecting and restoring forest ecosystems is essential if we are to preserve the biodiversity, critical habitats, and prevent species extinction.

Investing in sustainable forestry can offer numerous benefits, extending beyond financial returns to include environmental impact and social benefits.

Stable Returns

Timberland assets have historically shown stable and appreciating values over the long term. The NCREIF Timberland Index demonstrates strong long-term performance, with an average annualised return of 10.8% over the past 37 years. [1]

What’s more, timberland investments have a low correlation with economic cycles, offering investors a hedge against volatility.

Environmental Impact

Adopting sustainable forestry practices is key in mitigating climate change by sequestering carbon dioxide from the atmosphere.  They can enhance carbon storage, regulate hydrological cycles, maintain water quality, and safeguard freshwater resources.

Social Benefits

Sustainable forestry projects can stimulate economic development and infrastructure improvement in rural areas, enhancing the quality of life for local residents. They create employment, support the local economy and contribute to rural livelihoods. Collaboration with local communities, indigenous peoples, and stakeholders fosters social cohesion and empowers marginalised groups.

By integrating sustainability considerations into investment decision-making processes, investors can generate attractive returns while contributing to positive environmental outcomes and promoting inclusive and equitable development.

[1] NCREIF | Index Returns  NCREIF TIMBERLAND PROPERTY INDEX

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Case Study:

Project: Rimu Forestlands Limited   |    Scale: 8,100 hectares   |   Location: New Zealand

This project is a recent acquisition for our Natural Capital Strategy.  The property constitutes 39% natural forest and scrub.  Our priorities are to protect and restore the native forest, generate additional carbon sequestration and make improvements to the rich biodiversity, protecting key species through active management and exotic pest control.

Well-managed timber plantations like Rimu, can play an increasingly important role in providing a reliable source of the necessary forest products to allow other sectors of the economy, like construction and packaging, to decarbonise.

At Rimu, it will be possible to drive financial returns both from harvesting the timber and/or from carbon credits.  We will adopt a variety of silviculture practices across the plantation.  These can include clear-cutting, continuous cover and group selection with the aim of creating a mosaic of age classes, improving biodiversity and the protection of riparian and steep slopes .

Using a flexible approach to different silviculture systems means we can strategically optimise timber or carbon depending on markets and assets.

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At Climate Asset Management some of the key areas we strive for best practice are:

1. Forest Certification: We seek third-party certification from organisations like the Forest Stewardship Council (FSC) or the Sustainable Forestry Initiative (SFI) to validate compliance with sustainable forestry standards.
2. Ecosystem-Based Management: We adopt an ecosystem-based management approach to minimize environmental impacts and enhance ecosystem resilience.
3. Community Engagement: We foster meaningful engagement with local communities, Indigenous peoples, and stakeholders throughout the forest management process.
4. Responsible Supply Chain Management: We establish robust supply chain traceability systems and implement sustainable procurement policies to ensure ethical sourcing practices.
5. Innovation and Technology: We harness the power of data analytics, remote sensing technologies, and innovative tools to inform forest management decisions and optimize operational efficiency.