STT, Forico, PFT, FPA, RMS and NAB are working with CSIRO on a project called Unlocking Financial Innovation in Forest Products with Natural Capital. Natural capital is the soil, air, water biodiversity and land resources that underpin food and fibre production. The forest industry plays a vital, front-line role in the stewardship of natural capital. Source: Timberbiz
Operational decisions within the industry can have significant positive or negative impacts on greenhouse gas emissions/carbon sequestration, nutrient cycles, water quality, air quality and biodiversity, as well as timber production.
As long as non-timber impacts remain unpriced, they do not directly affect this sector’s financial performance.
Forests are exposed to a wide variety of natural capital risks, including climate change, extreme weather events, changes in the distributions of pests, weeds and diseases, bushfires and more.
While forest managers are generally aware of these risks and how to manage them, the level of risk for any given asset is not transparent due to the lack of a common framework to systematically assess and quantify such risks.
For forest investors, this translates to increased capital costs. Forests are currently valued based on their standing timber, meaning financial flows into the forest sector are substantially less, and at a higher cost than they might otherwise be.
The research activities aim is to:
- Assess opportunities for non-timber natural capital financing, barriers to adoption and opportunities to overcome these barriers. The assessment will be presented as an executive briefing paper aimed at financial and forestry stakeholders;
- Develop a forestry-specific natural capital risk assessment methodology which involves characterising natural capital impacts and dependencies leading to financial risks associated with the three major Tasmanian forestry sectors (softwood and hardwood plantations, native forests);
- Assess opportunities to reduce the cost of current and future natural capital data management through optimisation of data collection and reporting across current compliance processes and future natural capital financial risk assessment; and
- Develop a standard for integrating natural capital information into forest estate management tools, to help forest managers streamline management of natural capital risk with other forest planning and operations.
