Investing in woodland conservation isn\u2019t just for\u00a0wealthy environmentalists\u00a0anymore. The investment arms of massive banks are getting into the game too, as interest mounts for nature-based solutions to remove greenhouse gasses from the atmosphere.<\/p>\n\n\n\n
Timber, wood that is grown to use for carpentry or to build homes, may be one of the lesser-known backable assets out there. It has long been considered a\u00a0reliable investment, and has even\u00a0held up well against inflation\u00a0as demand and pricing for the commodity tends to benefit as inflation rises.<\/p>\n\n\n\n
It\u2019s part of the reason JPMorgan Chase\u2019s asset management arm has had\u00a0timber in its portfolio\u00a0for years, and why it now plans to double down.The bank\u00a0announced\u00a0on Wednesday it had bought 250,000 acres more of timberland across three sites in the Southeastern U.S. for $500 million. The woodlands will be managed by JP Morgan\u2019s Campbell Global, an investment manager with three decades of experience in natural resource management.<\/p>\n\n\n\n
The bank\u2019s investment will likely provide returns to JPMorgan as\u00a0lumber prices rise\u00a0on the back of a potential rebound in the U.S. housing market. But another reason for the largest investment bank in the world by revenue to put its money on timber lies in the value of keeping the trees standing, rather than cutting them down.<\/p>\n\n\n\n
\u201cThe properties will be continuously managed for both carbon capture and timber production to meet growing demand for sustainable building products and other uses,\u201d JPMorgan wrote, as the bank and other institutional investors like it start piling into the rapidly-growing market for carbon sequestration.<\/p>\n\n\n\n
Since JPMorgan\u00a0acquired\u00a0Campbell Global in 2021, it made clear that its interest in forests was not just about cutting down trees, and was designed to prove that sustainable investing and positive returns could go hand in hand.<\/p>\n\n\n\n
In addition to providing a refuge for wildlife, woodland conservation can have a direct effect on mitigating climate change by absorbing planet-warming carbon dioxide from the air. Between 2001 and 2019, the world\u2019s forest absorbed twice the amount of carbon they released during the same time, according to\u00a0a 2021 study, acting as a \u201ccarbon sink\u201d that captured a net 7.6 billion metric tons of CO2 a year, or one and a half times more carbon than the entire U.S. emits annually.<\/p>\n\n\n\n
With\u00a0direct air capture\u00a0technologies to manually suck carbon out of the atmosphere still far away from being implemented at scale, the UN has touted the ability of\u00a0nature-based solutions, including forests and oceans, to capture carbon.<\/p>\n\n\n\n
But the ready availability of natural formations to capture carbon has also caught the eye of the private sector as businesses seek out ways to minimize their own carbon footprints and continue profiting while they\u2019re at it.<\/p>\n\n\n\n
The growing market for\u00a0carbon offsets\u2014companies accounting for the emissions they generate by neutralizing emissions elsewhere\u2014is\u00a0far from perfect, but it does provide a market incentive for conservation and emissions reductions.<\/p>\n\n\n\n
The 250,000 acres of forested land now managed by Campbell Global, for instance, includes around 120 million standing trees holding 18 million metric tons of stored carbon dioxide equivalent, according to JPMorgan. By ensuring a portion of those trees remain untouched and continue absorbing carbon for longer, investors are reaping more tradable carbon offsets which, because they are in\u00a0increasingly short supply, can be very valuable.<\/p>\n\n\n\n
\u201cFor timber investors, there has been a transformation in the ability to generate income from trees while they grow: Rather than waiting to get paid, they can now get paid to wait,\u201d Kristin Kallergis Rowland, global head of alternative investments at JPMorgan, wrote in a September\u00a0blog post.<\/p>\n\n\n\n
For investors, keeping trees in the ground not only helps reduce atmospheric carbon, but can ensure a more reliable return stream over the long term. Fewer trees used for timber reduces the supply over the long term, which would push up lumber prices and benefit investors, Rowland wrote, adding that long-lived real assets like standing trees can even provide a more resilient hedge against inflation than other commodities.<\/p>\n\n\n\n
When JPMorgan acquired Campbell Global in 2021, the goal was to \u201cintegrate sustainability into our business in a way that is meaningful,\u201d JPMorgan\u2019s Asset Management CEO George Gatch\u00a0said at the time.<\/p>\n\n\n\n
\u201cInvesting in timberland\u2026will allow us to apply our expertise in managing real assets to forests, which are a natural solution to many of the world\u2019s climate, biodiversity and social challenges,\u201d he added.<\/p>\n\n\n\n