Forests are an important biological resource with a critical role to play in carbon sequestration. In this webinar replay, Cornerstone CEO Erika Karp talks with Bettina von Hagen, CEO of EFM, which specializes in implementing ecological forestry principles within an investment context. They discuss the role of forestry investing in limiting global warming, potential risks from timber harvesting and how to mitigate them, and the potential for investments to foster rural and tribal economic development in the Pacific Northwest. Erika and Bettina are joined by Cornerstone’s Jennifer Leonard, Executive Director of Market Strategy & Manager Research.

During the webinar we received several questions that our speakers couldn’t get to during the session. The team at EFM have kindly provided answers below.

How can we incentive our communities to plant more trees and how can we reinforce ‘greening’ of our urban areas?

Supporting carbon policies and markets that finance and reward reforestation and forest protection is one of the most powerful mechanisms to incentivize tree planting  The California regulatory carbon market has spurred significant reforestation projects, especially in the Mississippi Delta.  There are also emerging carbon protocols for urban forests.  In addition to carbon markets, land use and development codes that include trees and other natural infrastructure are also significant catalysts for increasing urban tree cover.

In terms of urban forestry, there are local non-profits that advocate and take action on urban greening and advocate for sound urban policies to preserve trees and pay for ecosystem services generated by our urban tree canopy. For example, in EFM’s Portland location, Friend of the Trees https://friendsoftrees.org/ is one option.

How does this intersect with the 1 Trillion Trees project?

EFM’s actions to create greater value in native forests, increase standing volume,  and to keep forests as forests, support the goals of the Trillion Trees project.  While our goals are similar, we differ in that The Trillion Trees is a non-profit project that focuses on the important work of forest landscape restoration globally, while EFM is a for-profit business that demonstrates the commercial viability of natural climate solutions to generate returns for investors and focuses on the carbon-rich forests of the western U.S. In the context of our investments, we restore and protect forested landscapes for the benefit of local communities and generate positive biodiversity, water and climate outcomes.

Do any of the panel members have high level product development/product approval contacts at governmental agencies?

At EFM our team is dedicated to developing relationships with the USFS and other governmental agencies that are focused on land acquisition and restoration in the Western US. We work closely with both federal and state forest agencies, as well as the forest products industry and nonprofits, on products that contribute to healthy and intact forests and restoration.  There are a number of products – existing and new – derived from wood fiber and other forest resources that support forest restoration and forest health, from biofuel to cross-laminated timber to biochar, and we are engaged with a number of partners on further developing and building supply networks for these products.

What is the experience of EFM in implementing forestry management strategies in national/state/local open space or urban forested lands?

While EFM focuses on the acquisition and management of private lands, many of our forests are designated to be acquired by public owners – State, Federal and Local. We are currently working on enabling several community forests, and are engaged in a few federal land sales. After decades of efforts through multiple administrations, the Great American Outdoors Act was passed by Congress and signed into law on August 4, 2020.  This bill has two components – funding $9.5 billion of delayed maintenance for national parks and other federal lands and, very significantly for EFM’s strategy – fully funding the Land and Water Conservation Fund (LWCF) at $900 million per year in perpetuity.  The LWCF is the source used by the US Forest Service, national parks, and other federal land agencies to acquire land for recreation and conservation.  It is relevant to our Funds’ strategy as there are properties in the portfolio that we want to sell to federal agencies as part of the long-term ecological uplift plan for the property.  In addition, many of our forests are located adjacent to federal, state and other public forests.  We work collaboratively with these public landowners on forest health, fire risk reduction, and improving public access to forestlands.

Is there an intention to invest in forests in Brazil?

EFM’s current funds are focused on restoring the natural forests of the western United States.  EFM does offer natural climate solutions advisory services across North and South America and Brazil presents an interesting opportunity for climate-smart forestry investments. We are able to discuss specific opportunities on a one-on-one basis based on desired investor outcomes.

What is Bettina’s view on how to handle invasive species such as the ash borer in the context of sustainable forestry?

There are a host of both introduced and native pest species that pose a risk to forests, from introduced species like the ash borer to native pests like bark beetles and Swiss needle cast (caused by a fungal pathogen, which, despite its name, is native to the western US).  While introduced pests are uniquely troublesome as there are (at least initially) no established predators or controls, native pests can also become invasive in the right conditions. The best defense against pests, whether introduced or native, is to foster a healthy, structurally complex, species-diverse forest.  Pests thrive on same-age plantations and on trees weakened by excessive density and competition.  Active management also plays a role, by immediately removing pest-affected trees and taking appropriate control measures.  In all cases,  a holistic perspective is helpful, including tolerance for a background level of pests that may be an important part of the food chain and creation of habitat such as standing dead trees that are so critical for nesting and foraging habitat for hundreds of species.

This is not to minimize the seriousness of introduced aggressive invasive species, where a public-private mobilization of active prevention and control measures is called for.

In terms of introduced tree species, forest health is seriously compromised when non-native species become established and aggressively expand into native forests. Invasive species can persist for decades and may drive out native species, reduce wildlife habitat, and alter soil moisture regimes. Our policies generally include:

  • maintaining invasive species populations at a controllable level across EFM’s ownership
  • focusing control efforts as soon as new populations are detected and attempt control before populations become well established.
  • leaving an undisturbed soil buffer around populations of exotics to slow their rate of spread.
  • focusing primarily on mechanical control methods

How do you engage with those who have had a long history of resisting forest management?

We believe that timberland investing has changed and in today’s market requires a differentiated approach to investing, one that includes the kind of climate-smart forestry that creates value for investors, stores carbon and helps mitigate the impact of climate change. Since 2004 EFM has been developing climate-smart approaches to natural forest management that are the keys to unlocking value in a carbon-constrained future. Our approach allows us to create value beyond producing logs and wood fiber, including improved carbon storage, habitat, soil formation, climate regulation, and water storage and purification. Additional benefits include community enhancement by creating locally based employment opportunities alongside the economic contributions of timber harvests and forest management and restoration activities.

How do you factor the risk of value destruction from wildfires that might start elsewhere then encroach on your properties?

Fire and weather events (such as high winds) are risks inherent to forestland investment and management and can be part of the natural cycle of renewal and regeneration for natural forests. Fire incidence can be infrequent to frequent depending on the forest type but is generally increasing as a result of climate change.  EFM moderates fire risk through the development of a detailed fire plan for each property, coordination with agencies and neighboring land owners on early detection and fire suppression, joining land-owner collaboratives that detect and suppress fire and through silvicultural treatments such as thinning and introducing physical fire breaks, all of which substantially reduce fire risk.  We primarily self-insure through geographic diversification which is weighted (by value) towards the coastal, temperate region. This region is very wet, and the incidence of historical fires is so low that commercial insurance is not efficient given the cost of insurance and the potential incidence of loss from fire.  However, we do seek insurance (although it is not consistently available) for properties that lie in drier regions where the incidence of fire is higher.   Finally, should a fire occur in a merchantable stand of timber, generally 70-80% of the timber value of the merchantable stands can be captured through salvage harvesting in the first two years after a fire.  With regard to fire risk from neighboring properties, one of our strategies is to create a shaded fuel break along our property borders.  These fuel breaks provide a place to stop or slow down a fire that starts on an adjoining property, and is usually built next to a road that provides access for fire suppression.