While the idea of natural capital and nature-based solutions is spreading amongst the investment community, the initial focus has been on a forest’s ability to sequester and store carbon. However, few investors know what sustainable forest management seeks to achieve, and why it can indeed be one of the answers to safeguarding biodiversity.
Given that global demand for timber is expected to increase to where it could exceed supply by as soon as 2040, sourcing wood from responsibly managed forests is critical.
Managing a forest sustainably means ensuring their long-term health and productivity and considering the environmental, social, and economic needs of today’s and future generations.
Characteristics of this approach
Mosaic landscape
Different ecosystems co-exist in one forest area: almost a third can be made up of set-aside areas where native trees and bushes of different species grow freely, intermingling with the productive forest, often composed of one or two main commercial species. Furthermore, there will always be trees of different ages. Encouraging a mix of species and ages enhances resilience against pests, diseases, and natural disasters.
Controlled harvesting
There is no extensive clear-cutting. The size of the areas to be harvested is regulated.
Obligation to reforest
Areas which have been harvested must be replanted – usually within a few months. Sustainable forests are managed under a ‘continuous forest regime’.
Use of pesticides and fertilisers
The use of pesticides and fertilisers, which can harm non-target species and impact soil and water quality, is restricted. Which pesticides and fertilisers are permitted depends on the region.
Stream management and water quality
Well-managed forests function as natural filters, regulating water flow and quality. Sustainable practices minimise soil erosion and protect water bodies. For example, there are no operations close to streams; instead, riparian buffer zones ensure a healthier environment for aquatic species.
Habitat protection
Sustainable forestry methods help preserve a variety of plant and animal species, providing niches for diverse organisms. For example, after harvesting, foresters leave debris piles and stumps to create wildlife habitats. Furthermore, conservation areas and riparian buffer zones preserve habitats for various species. Maintaining ecological corridors allows species to move around.
Soil health
Sustainable practices help maintain soil fertility and structure, supporting a diverse range of micro-organisms and invertebrates essential for ecosystem health, and minimise soil erosion.
Social responsibility
The sale of timber and other forest products (medicinal products, fruits, resin, leaves, etc.) provides work and livelihoods for local communities. In addition, sustainable management safeguards the rights of indigenous people and other stakeholders, with an emphasis on the equitable distribution of benefits, and promoting social well-being.
Adaptive management
Regularly assessing the health of forest ecosystems, management practices, and the effectiveness of conservation measures is key to sustainable forest management. Strategies are adjusted based on new information and the effects of climate change over time.
Ensuring and maintaining standards
To safeguard that forests are managed sustainably, we seek third-party certification and annual audits of all assets under direct management or under advice. Instead of saying that we are doing the right thing, we believe that getting an external stamp of approval carries more weight.
Third-party certification helps ensure that our forest management practices are transparent, well-documented, meet environmental and social standards, and that stakeholders are accountable for their actions.
We recognise two certification schemes: the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC, which the Sustainable Forestry Initiative (SFI) in the US is part of). We understand these schemes are not perfect, however. Accordingly, we are able to implement or recommend further actions to enhance the environment, improve biodiversity, water resources, and soil, avoid negative impacts on ecosystems, and improve asset resilience.
A robust approach
We believe that following sustainable management principles in line with certification standards allows investments in forestry to play a role as a source of sustainable timber products, while addressing global biodiversity loss and fostering resilient ecosystems.
Such a responsible approach also helps provide livelihoods for local communities and ensures that the rights of indigenous people and other stakeholders are respected.
With a steady and growing demand for wood as a sustainable raw material, predictability around the life cycle of trees, stable values that can act as an inflation hedge and its role as a portfolio diversifier we believe investing in sustainable forestry can offer investors a compelling opportunity.
For further detailed information on the benefits of investing in this asset class read Timberland – A Growing Asset Class and watch NEW Video : Investing in Sustainable Forestry.
