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 an important role in the stewardship of natural capital. 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 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. This project aims to unlock investment in the non-timber natural capital value of Australian forests by developing methods and tools to cost-effectively assess, monitor and manage natural capital risks and opportunities.