Evergreen jungle forest after rain. Natural misty background. Bali, Indonesia.
Evergreen jungle forest after rain. Natural misty background. Bali, Indonesia.

Investing in trees and forests combats global warming and provides good financial returns.

The best way to tackle climate change may come naturally. For years, solutions have focused on clean energy technology, including electrifying transport and driving down the cost of wind and solar power.

But the conservation and sustainable management of nature are now recognised as the other critical pathway to a climate-positive future, which on balance, benefits rather than damages the climate and can also help us protect biodiversity and water. 

It sounds simple. We know that trees absorb carbon dioxide from the atmosphere and store it in their living biomass, releasing oxygen to the air. It has been said that when you scale the “technology” of a tree, you get a forest. So if it's so straightforward, why hasn’t the power of the world’s forests already been harnessed for natural climate solutions? 

In fact forestry and sustainable land use have been a core part of the climate change debate for decades, but the subject has been plagued with concerns.

What if the carbon we store in forests doesn’t stay there for ever? What would happen if we paid people not to deforest – would they just chop down a forest to create agricultural land somewhere else? 

While governments and civil society have argued over the rules for carbon accounting, which would help answer these questions, the value of sequestering and storing carbon in the world’s forests has gone largely unpriced, and deforestation has accelerated in many parts of the world, particularly in the tropics.

But some governments are successfully placing forests at the center of climate solutions. In California, forest carbon projects are playing a critical role in meeting the state’s emission reduction targets: forestry projects have so far generated 80 percent of the offsets in its robust emissions trading scheme. 

California has made it clear that forests can be part of a comprehensive climate solution – one that focuses on reducing industrial emissions, transitioning to clean energy and electric transport, and harnessing the power of nature for carbon removal. 

Business is also stepping up for nature, with commitments to decarbonize supply chains through natural climate solutions – conserving forests, restoring ecosystems, and sustainably managing agriculture and forestry.

Forestry is attracting increasing interest from investors and corporations seeking to reduce or even eliminate their greenhouse gas emissions. They are investing in projects to plant trees or buy and manage forests, counting the benefit to the climate of the carbon removed from the atmosphere against the emissions of greenhouse gases from their supply chains. 

And forestry is already an established asset class for investors, with more than $100 billion of institutional investment globally: estimates suggest it has about $300 billion of investable assets. Our company, New Forests – which manages $3.65 billion of assets across nearly a million hectares (almost 2.5 million acres) throughout Australia, New Zealand, Indonesia, Malaysia, Laos, and the United States – forecasts that, if policies and market incentives align, global forestry investment could become a $1 trillion asset class and a cornerstone of the low-carbon economy.

This growth would partly come from expanding forestry resources, while taking into account social and environmental constraints such as the need for land for food security and protecting community land rights. 

We expect that the next wave of investment will be into the emerging markets of Southeast Asia and Africa, where there is tremendous opportunity both for commercial forestry plantations and for new community-centric investment models based on nature conservation.

Further growth would be supported by global pricing of the value of forest carbon. And still further capital and value will be driven into the forestry sector by growth in the demand, already taking place, for sustainable wood products and fiber. 

Indeed forestry is already being reinvented as a solutions-based industry. Single-use plastics are being replaced by advanced wood-fiber-based packaging, while polyester fabrics are passed over in favor of Tencel, rayon, and other fabrics made from wood pulp. Skyscrapers once made of steel and concrete now feature advanced mass-timber products made of engineered wood.

Forest products are increasingly a part of our everyday lives, storing carbon in our homes and offices and displacing the need for ones derived from fossil fuels. This rising new eco-economy and bioeconomy are increasing asset prices in forestry, supporting stronger returns and creating new option value in forestry assets. 

As soon as 2030, the $1 trillion forestry asset class may well offer more than just another trillion trees, providing goods and services and benefits for climate resilience and the global commons, and for investor returns. 

What is now needed is to merge the experience of the established investment managers, who can provide long-term, stable returns and production yields from certified sustainable forest management, with the ambition of a global community that is waking up to the reality that nature is one of our best climate solutions.

This piece was originally published for the GEF-Telegraph Partnership.


Prof. William … April 9, 2020

Recognizing the value of forests for addressing climate is an essential step in slowing and eventually reversing the growth of atmospheric carbon dioxide.
However, it is a pipe dream to assume that increasing the use of wood products for materials like rayon and buildings will be an effective solution. It is essential that we protect all remaining older and intact forests, and set aside at least half of all secondary forests to become large sinks for carbon and havens for biodiversity. Proforestation managements that allow forests to achieve their ecological potential for carbon storage and ecological structure is far more effective than planting new trees that will take many decades to remove significant amounts of carbon. We must pay land owners to store carbon on their lands and halt harvesting on much of our public forested lands. This is the lowest cost contribution to closing the gap between emissions and removal rates. We must simultaneously increase forest growth and decrease emissions from forest losses and fossil fuel emissions. Accurate accounting from all sources including from the forest products industry is essential to success. The proposal described here is well intentioned, but lacks rigorous quantitative analysis.