Carbon-focused investors in both the timberland and agriculture markets have increasing opportunities to meet both their financial and sustainability goals, say Manulife Investment Management’s Eric Cooperström and Thomas Sarno.
Q: What kind of opportunities can generally be found for carbon-focused timberland investors?
Thomas: Traditionally, commercial timberlands have been primarily valued using a discounted cash flow approach focused on the expected streams of revenue generated from the sale of future timber harvests. And we’ve always managed timberland properties for more than just their timber value, such as capitalizing on the opportunities presented by leases, recreation access, and easements, among other value-added strategies.
Today, the ability of trees to naturally capture CO2 from the atmosphere and provide long-term storage in secure carbon sinks has added a new dimension and opened new timberland investment opportunities. There’s a range of drivers emerging that should further support forestry as a viable, scalable, and investable NCS opportunity, such as the global prioritization of the Paris Agreement goals, increased carbon market participation, and growing demand for high-quality carbon credits.
Driven by the surge of net-zero commitments, companies and investors are increasingly looking to carbon markets as a transitional tool for achieving their climate goals. Voluntary carbon offset demand is expected to increase by a factor of up to 100 by 2050, driven by the increase in corporate net-zero commitments, which, in turn, is likely to drive carbon offset prices higher.