How can forest asset managers build climate resilience?

Climate change is increasingly impacting forests, making them more vulnerable to natural disasters such as droughts and wildfires, as well as pest outbreaks. Despite greater recognition of their critical role, global forest loss continues to outpace gains. For instance, the global rate of tree cover gain fell from 41.5 million hectares between 2000 and 2005 to just 22.6 million hectares between 2015 and 2020.

In this context, investors have a unique opportunity to channel capital into forestry-based solutions for climate mitigation, adaptation and resilience. This can include investments in timber plantations or the protection of conservation areas. Beyond portfolio diversification, such investments enable investors to actively accelerate the transition toward a sustainable future.

To ensure these investments remain both strategic and environmentally responsible, it is crucial for investors to anticipate the mounting risks posed by climate change, with physical threats to forestry assets representing the most immediate challenge.

Why climate adaptation matters for forest asset managers?

Forests face a wide range of climate-related risks, including droughts, floods, extreme storms and wildfires. These hazards can reduce growth, cause tree dieback, and, over time, alter forest structure and composition. Changing temperatures may hinder natural regeneration and increase vulnerability to pests. Operationally, such hazards can disrupt harvesting, transportation and planting activities, leading to business interruptions.

These risks translate into significant financial impacts for investors:

• Physical stranding: forests may be partially or entirely destroyed by natural disasters (e.g., wildfires), resulting in asset losses.
• Increased operating expenses (OPEX): costs rise due to restoration, replanting and higher insurance premiums.
• Increased capital expenditures (CAPEX): additional investments may be needed for adaptive equipment or infrastructure.
• Reduced revenues: natural disasters can lower timber production and quality, limit carbon sequestration and therefore reduce the value of timber and carbon credits. Operational disruptions, from challenging management conditions to supply chain interruptions, can further affect business continuity.

To safeguard long-term performance and protect asset value amid rising climate volatility, forest asset managers must take a proactive approach to adaptation. While forests naturally adapt, these processes are often too slow to keep pace with climate change. For example, boreal forests are gradually shifting northward in response to changing temperature and precipitation patterns, but this migration is insufficient to match the speed of climate change, potentially eroding their ecological advantage in current regions.

Despite these challenges, investors play a critical role in supporting forest adaptation. By promoting sustainable forest management practices, they can help protect ecosystems and accelerate resilience to climate change.

Adaptation measure screening: sustainable forest management planning, exported from our Altitude adaptation catalogue

What key adaptation measures can forest asset managers implement?

A good starting point for managing climate-related risks is conducting a comprehensive climate risk assessment, such as those offered by Altitude.

Key adaptation measures to consider include (non-exhaustive):

• Understand site-specific risks: perform a detailed analysis of the geological and ecological context of your forests.
• Ensure appropriate insurance coverage: protect assets against extreme events.
• Develop a contingency plan: prepare rapid and organized responses to hazards.
• Adapt forest and infrastructure management: modify forest layout and design, and implement effective fire and pest control measures.
• Increase species diversity: select species combinations suited to local environmental conditions to strengthen resilience.
• Invest in Nature-Based Solutions (NBS): apply the mitigation hierarchy, “Avoidance, Mitigation, Offset and Restoration”, to maximize climate benefits.

Adaptation: a strategic opportunity for forest asset managers?

Forests face significant and growing physical risks from climate change, but these challenges also create strategic investment opportunities. Rising climate finance and the transition to a low-carbon economy are expected to increase demand for timber from sustainably managed forests, low-carbon fibers and building materials, and innovative investment models in natural climate solutions.

Global area of forest conservation and restoration projects added in million ha under the Net Zero 2050 scenario, as illustrated in Altitude

This dynamic fosters a positive investment cycle: financial returns are paired with measurable climate outcomes, often supported by public incentives such as subsidies or insurance benefits, particularly after extreme events.

Investing in forestry is therefore not only a means of portfolio diversification and long-term value creation, but also a way to protect ecosystems, generate carbon credits and contribute directly to achieving carbon neutrality by 2050.