As demand grows for nature-based investment solutions, the ability of managed forests to provide uncorrelated and inflation-linked returns alongside the promotion of natural habitats can be attractive to many investors. However, generating attractive long-term returns from timberland while supporting nature requires an experienced forestry manager.

Sustainable and resilient forests

The nature-based credentials of investible timberland are clear. Forests are home to 80% of all land-based species on Earth, providing critical habitats for many rare, threatened and endangered species. Forest assets can also provide additional nature-based outcomes, such as carbon sequestration and water conservation, while still giving investors the chance to generate attractive, uncorrelated returns that have the potential to increase in tandem with inflation.

Delivering outcomes that have both nature-positive and financial objectives from sustainably managed working forests requires the application of science and technology, backed by experience. In order to pursue these dual objectives, landscape level optimisation plans can be coupled with site-specific treatments to promote a healthy forest condition, which both supports species richness and is more resilient to climate change. 

Capturing carbon

Forests are the world’s largest natural terrestrial carbon sink, absorbing roughly 2 billion metric tonnes of carbon dioxide equivalent (tC02e) each year according to research led by the University of Oxford (“The State of Carbon Dioxide Removal, 1st Edition”). The ability of trees to efficiently sequester carbon through photosynthesis means that actively managed timberland offers decarbonisation benefits. Investors have an opportunity to reduce the carbon footprint of their overall portfolio by reallocating capital to a less greenhouse gas intensive asset class, or to generate verified carbon assets (VCAs), or carbon credits, which they can sell to generate yield or retire to further offset their own carbon footprint.

VCA projects encourage forest growth and biodiversity by incentivising improved forest management projects, or via afforestation, which is the conversion of land that was not previously forested into forestland. VCAs are only generated from the delta, or difference, between these carbon sequestration projects and business-as-usual sequestration.

Supporting nature

Seeking to maximise timberland returns by focusing on nature creates other co-benefits. With 75% of the world’s accessible freshwater coming from forested watersheds, for example, managed forests can help promote soil and water conservation through the use of setbacks, which are spaces in a forest closest to rivers and streams that cannot be harvested in order to protect waterways and prevent soil erosion.

Advanced forestry management techniques, which work to improve the health and resilience of a forest, also bring additional benefits in terms of the protection they can offer to habitats for a wide range of species. Forest thinning, for example, works by selecting younger trees for harvesting, which opens up the forest canopy and allows more established trees to grow faster. While income is generated from the processing of the younger trees, and the value of the older trees can increase as they mature, thinning also supports the many species that depend on older trees, or open spaces to thrive.

In this way, techniques such as forest thinning go hand in hand with conservation. Any rare, threatened, or endangered species identified as potentially living in an area of timberland can be registered and the forest’s management plan can be adapted to maintain the generation of returns while helping to support native wildlife or vegetation. For instance, restrictions can be imposed to specify that no timber harvesting occurs within a certain distance of a nesting site, or of a migration pathway.

Measuring impact

While the nature-based aspects of sustainable forest management are clear, the recent release of the recommendations of the Taskforce on Nature-Related Financial Disclosures (TNFD) is now leading to increased interest in investable timberland.

In the same way that the Taskforce for Climate-Related Financial Disclosures (TCFD), and now International Sustainability Standards Board (ISSB), enables more effective disclosure of climate risks and opportunities, the TNFD aims to do the same for evolving nature-related risk exposures. However, quantifying the total impact of an investment on nature remains challenging despite these reporting developments, particularly for nature-based real assets, such as timberland. Most existing metrics focus on the negative impacts that an investment could have on biodiversity, but often fail to take into account the potential benefits.

To try to address some of these limitations, timberland managers can develop programmes to identify and record natural attributes, such as unique habitats, species, cultural heritage sites, and waterways that may exist on a forest property. Managers can then look to measure the impact that their management of specific properties has had on nature, or on carbon sequestration, for example.

Conclusion

When it comes to investing in sustainably managed timberland, the potential for generation of positive economic returns goes hand in hand with the maintenance of healthy, resilient forests. With ongoing efforts to measure the impact of investments on the natural environment highlighting timber’s nature-based credentials, the ability of forests to support wildlife habitats, or to offset carbon emissions through photosynthesis, is helping to drive further interest in the asset class.

Investing with Campbell Global

Campbell Global has over 40 years of dedicated experience as a vertically-integrated forestry manager. Campbell Global forests are actively managed from the forest floor up by third-party contractors whose activities are administered and monitored by Campbell Global personnel. The latest technology and data modelling techniques are used to guide the planting, thinning and harvesting of trees, with the aim of maximising the long-term economic benefits for investors. 

Sustainable and resilient forest management

By promoting healthy tree growth, and reducing the risks to returns from fires, invasive species and disease, Campbell Global is able to offer an attractive return profile, while also offering carbon capture opportunities, support for nature and a number of other sustainability characteristics.

  • Carbon sequestration
    • Campbell Global dedicates specific assets to the generation of verified carbon assets through either improved forest management or afforestation carbon projects.
    • Campbell Global also produces environmental, social and governance (ESG) KPIs and annual carbon impact results, in which it calculates the amount of metric tonnes of carbon dioxide equivalent (tCO2e) that its managed forests sequester while also reporting its Scope 1, 2, and 3 emissions.
    • In 2022, Campbell Global forests sequestered 2.4 million tC02e net of Campbell Global’s scope 1 and 2 carbon emissions.
    • Campbell Global’s carbon footprint and methodology are detailed in its Carbon Impact Report.
  • Supporting biodiversity
    • Campbell Global assesses biodiversity across its forests, which it uses as a baseline over which it can measure year-over-year change(s) and/or the impact(s) from the deployment of property-specific biodiversity enhancement plans.
    • Species identified as living in Campbell Global forests are registered in a forestry management fact file as part of a Biodiversity Enhancement Plan. 
    • If an area of timberland is identified as a “forest with exceptional conservation value”, forest management (including harvesting activities) can be adapted to support habitats.
    • Campbell Global forests are home to 399 protected species, and counting.
  • Social and environmental characteristics
    • Campbell Global forests promote sustainable employment and decent work for all, supporting 2,700 direct and indirect jobs.
    • Campbell global targets (but can’t guarantee) log sales for use in renewable, environmentally friendly building materials. While offcuts may be used in other products, the aim is to provide wood for use in resilient and sustainable construction.
The information in this document is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. No representation, warranty or undertaking is given as to the accuracy or completeness of the information and opinions contained herein. No reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness and nothing contained herein shall be relied upon as a promise or representation as to future performance.
Certain information in this document has been derived from materials furnished by outside sources. Although that information has been obtained from sources reasonably believed to be reliable, Campbell Global, LLC does not guarantee its accuracy, completeness, or fairness. Any forecasted timber growth, timber harvest activity, timber consumption patterns, timber prices, future macroeconomic measurements, opinions, and estimates set forth herein are presented for informational purposes only and involve a number of assumptions that may not prove to be valid and may change without notice.
Certain information contained in this document constitutes forward-looking statements, which can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "target," "project," "estimate," "intend," "continue," or "believe," or the negatives thereof or other variations thereon or comparable terminology. The projections and forward-looking statements included herein are subject to risks, uncertainties, and assumptions. Some important factors that could cause actual results to differ materially from those in any forward-looking statements include the following: changes in financial, market, and economic or legal conditions, among others.
Campbell Global is the marketing name used by Campbell Global, LLC, an investment manager, and for investment advisory services provided by Campbell Global, LLC, an SEC registered investment adviser. Campbell Global is part of J.P. Morgan Asset Management, the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.
 
NOT FOR RETAIL DISTRIBUTION: This communication has been prepared exclusively for institutional, wholesale, professional clients and qualified investors only, as defined by local laws and regulations.
The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield are not a reliable indicator of current and future results.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.
To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be; in Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919).
For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.
Copyright 2024 JPMorgan Chase & Co. All rights reserved.
09ut241101165639