Investors increasingly understand the role sustainable forestry can play in the path to a net zero economy, argues Andrew Boutwell, Senior Managing Director and Head of Investment Management at Forest Investment Associates.

Environmental Finance: How can a diversified forest portfolio pursue competitive financial outcomes?

Andrew Boutwell: A well-diversified forest portfolio can generate risk-adjusted returns by balancing biological growth, market access, and asset characteristics across regions, species, and end markets. This means combining different forest types and geographies to manage market cycles, weather variability, and operational risk. Timber revenue, land appreciation, and optionality around ecosystem services such as carbon or conservation can provide a blend of current income and long-term value creation.

Investors increasingly see forests as platforms for a broader set of value streams, for example ranging from carbon credits and conservation finance to renewable energy siting, mitigation banking, and participation in the growing bio-economy. As the pricing of natural capital becomes more sophisticated and land markets respond to climate adaptation needs, we believe diversified forest portfolios will be well-positioned to capture these uplift opportunities.

This shift is driving renewed focus on land use optimisation through data, analytics, and active management. From converting marginal plantations to solar use, to improving productivity on high-quality soils, to conserving ecologically sensitive areas, diversified forest portfolios enable strategic flexibility. For investors, this means cash flow from timber alongside exposure to a growing set of land-based value drivers aligned with climate-smart use.

EF: How did you construct and deploy a portfolio that brings decarbonisation into the heart of the strategy?

AB: In the case of the Climate-Smart Forestry Strategy, our client, a Danish pension provider, had identified working forests as a critical decarbonisation tool and wanted to use them as an engine of net carbon removals. FIA had in place a carbon measurement and reporting system and we were actively assessing opportunities throughout our portfolio to enhance and articulate the climate benefits of sustainable forest management.

To guide implementation, we conducted a detailed, data-driven assessment of carbon sequestration potential across regions, forest types, and stand conditions, drawing on FIA’s nearly 40 years of transaction and forest management data.

Crucially, we also applied our carbon measurement and reporting guidelines to ensure we had a common definition and way of understanding ‘net carbon sequestration’ as a key performance indicator (KPI) for the fund. These guidelines were aligned with international best practices and the International Panel on Climate Change (IPCC) land use accounting. This approach to both portfolio construction and carbon accounting ensured that decarbonisation was not an ancillary feature, but a fundamental investment objective.

EF: How has interest grown in this kind of investment and what is its future?

AB: What makes forests compelling is their flexibility: they offer multiple value pathways. This means a capable manager can work closely with investors to understand their priorities and construct a thesis or portfolio that meets both financial and climate-related goals.

This fund reflects that approach. Instead of focusing on carbon offsets, it looks at portfolio-wide management of the natural carbon sequestration of working forests, allowing us to manage for that outcome while seeking to deliver steady returns. We have also begun implementing climate change adaptation measures aligned with the EU Taxonomy for each property.

We see timberland playing a bigger role in institutional net-zero plans. With thoughtful design and disciplined execution, forestry can meet the dual goals of climate impact and financial performance—credibly and at scale.

EF: How do you ensure your forestry investments deliver genuine, high-integrity climate outcomes?

AB: Responsible forestry isn’t just aligned with climate goals—it is a core climate solution. We rely on data-driven approaches benchmarked to leading standards and best practices. Our carbon measurement and reporting processes are designed for transparency and consistency.

Just as important is how the forests themselves are managed. That’s why we certify operations under internationally recognised frameworks such as Programme for the Endorsement of Forest Certification (PEFC) and Forest Stewardship Council (FSC), and continually strengthen FIA’s broader environmental, social, and governance practices.

We define outcomes not just by carbon volumes, but by how well our investments support durable climate benefits alongside ecological stewardship and long-term economic value.

EF: What assurance of the climate outcomes of the portfolio were you able to construct and how?

AB: Before investing, our client wanted to make sure our carbon approach matched their climate goals and reporting needs, so they brought in a third party to review our internal framework and guiding principles. That gave them early confidence in how the fund would operate, the quality of the data behind it, and the methodologies behind the calculations.

We also took it a step further by bringing in a Big Four audit firm. First, they helped us assess and strengthen our internal systems through a carbon readiness review.

Then, we worked with them to secure limited assurance on our reported net carbon sequestration results as part of the fund’s annual audits. That process helped confirm that the climate data were solid and aligned with investor expectations.

We’ve been working since 2020 to apply consistent carbon accounting across our timberland portfolio. We track net greenhouse gas changes from forest growth, harvest, storage in wood products, and now also can report all scopes of greenhouse gas emissions. We’ve continued to evolve those methods to support quality, investor-relevant data. Our goal is to give investors confidence that forestry can deliver measurable and credible climate outcomes.

We apply this belief across a range of strategies, from traditional timberland portfolios that generate carbon benefits through sustainable management, to strategies where carbon mitigation is a central objective.

For more information about FIA, go to www.forestinvest.com.