As demand grows for nature-based investment solutions, the ability of managed forests to provide uncorrelated and inflation-linked returns alongside the preservation 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 providing investors the opportunity to generate attractive, uncorrelated returns that have the potential to increase in tandem with inflation.
Delivering outcomes that have both strong nature-positive and financial objectives from sustainably managed working forests requires the application of science and technology, backed by experience. To pursue these dual objectives, forestry professionals leverage landscape level optimisation plans with site-specific treatments to promote healthy forest conditions, which both support biodiversity richness and climate change resilience.
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), i.e. carbon credits, which they can sell to generate yield or retire to further offset their own carbon footprint.
Forest carbon projects that target additionality encourage forest growth and biodiversity by incentivising improved forest management projects or afforestation, which is the conversion of land that was not previously forested into forestland. VCAs are only generated from the delta, or the 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 using setbacks, which are spaces in a forest closest to rivers and streams that cannot be harvested to protect waterways and prevent soil erosion. As a result, setbacks can boast a myriad of native tree species, the canopies of which shade waterways, moderating water temperatures, while root structures can improve fluvial processes and create habitat complexity for fish and other aquatic species.
Advanced forestry management treatments applied to improve the health and resilience of a forest, also bring additional benefits in terms of the protection they can offer for a wide range of species. Forest thinning, for example, works by selecting younger trees for harvesting, which opens the forest canopy and allows more established trees to grow bigger and faster. While income is generated from the processing of the younger trees, and the value of the remaining trees increase as they mature, thinning also supports the many species that depend on more open forest floors to thrive.
Any rare, threatened, or endangered species identified as potentially known to occur on or near an area of timberland is registered in either proprietary or public databases and the forest’s management plan can be adapted to maintain the generation of returns while supporting 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
The nature-based aspects of sustainable forest management are clear and affirmed by increasing interest in investable timberland.
However, quantifying the total impact of an investment on nature remains challenging despite reporting developments, particularly for nature-based real assets, such as timberland. Most existing metrics focus on the negative impacts that more traditional investments could have but often fail to consider the potential benefits that direct investments into real assets such as timberland offer
To try to address some of these limitations within the complexities of place-based specificities, some timberland managers are developing property specific plans that identify and record natural attributes, such as unique habitats, species, cultural heritage sites, and waterways that may exist on the 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. This localized approach can be complemented by the nascent but rapidly growing development of tools that leverage artificial intelligence, airborne technologies, acoustic monitoring, eDNA, etc., and seek to improve the measurement, verification, and reporting of biodiversity.
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 natural sequestration processes, is helping to drive further interest in the asset class.
Investing with Campbell Global
Campbell Global, a J.P. Morgan Company, is a leading global investment manager focused on forestland, with headquarters in Portland, Oregon. With over four decades of experience, Campbell Global has managed more than 5 million acres worldwide for pension funds, foundations, family offices, and other institutional investors. As of December 31, 2024, Campbell Global oversees $10.1 billion in assets and 1.4 million acres globally, supported by approximately 150 employees.
Sustainable and resilient forest management
By promoting healthy tree growth, and reducing the risks to returns from fires, invasive species and disease, Campbell Global can offer an attractive return profile, while also offering carbon capture opportunities, support for nature and several other sustainability characteristics.
- Carbon sequestration
- Campbell Global also produces environmental, social and governance (ESG) KPIs and annual carbon impact results, in which it calculates the number of metric tonnes of carbon dioxide equivalent (tCO2e) that its managed forests sequester while also reporting its Scope 1, 2, and 3 emissions.
- In 2024, Campbell Global forests sequestered 3.0 million tC02e net of Campbell Global’s scope 1 and 2 carbon emissions. Even when accounting for Scope 3 emissions, the forest still maintained a net sequestration impact.
- Campbell Global’s carbon footprint and methodology are detailed in its Carbon Impact Report.
- Campbell Global also dedicates specific assets to the generation of verified carbon assets through either improved forest management or afforestation carbon projects.
- Supporting biodiversity
- Campbell Global assesses biodiversity across its forests and creates property-specific biodiversity enhancement plans which it uses as roadmap to develope and implement initiatives over which it can measure year-over-year change(s) and/or the impact(s).
- Campbell Global utilizes public databases, onsite surveys, and boots on the ground presence to record and monitor for rare, threatened, and endangered (RTE) species on or nearby properties are.
- If an area of timberland is identified as habitat with exceptional conservation value, forest management activities may be adapted to conserve and promote such areas.
- Campbell Global managed forests are home to 500 RTE species and counting.
- Social and environmental characteristics
- Campbell Global managed forests promote sustainable employment and decent work for all, supporting over 2,900 direct and indirect jobs.
- Campbell Global endeavours to produce logs for use in construction which supports the development and promotion of sustainable housing.