Manulife: Sowing the seeds of sustainability

Stewardship of both people and the environment is key to the long-term health and productivity of timberland assets, says Manulife Investment Management’s Eduardo Hernandez.

This article is sponsored by Manulife Investment Management

Protecting forests is critical if the world is going to prevent the disastrous effects of climate change. Each year, forests absorb double the amount of carbon dioxide than they emit into the Earth’s atmosphere, while deforestation has decimated global species of flora and fauna in recent decades.

The reality is that without urgent action, the planet could soon lose this vital carbon sink as well as much of its most vulnerable biodiversity. Eduardo Hernandez, global head of timberland operations at Manulife Investment Management, explains why a boots-on-the-ground approach to sustainable timberland management is essential for healthy and diverse ecosystems to thrive.

How are managers working to protect delicate ecosystems on the land they manage?

Eduardo Hernandez

All the forests we manage are third-party certified as sustainable under different sustainability standards. Common to these third-party certification standards are objectives that address climate resilience, healthy ecosystems, healthy communities and active management – we are very proud of our certification record.

Many plants and animals live in our forests and associated streams, wetlands and other natural landscapes. We have a long track record of finding solutions to protect these habitats by working proactively with regulators. This adds stability to our planning and helps safeguard our investors’ returns.

In Oregon, we have worked with forest sector and conservation stakeholder partners to negotiate greater streamside protections that produce lasting environmental benefits but also provide our investors with greater business certainty. These ecosystem protections are very location specific – from initiating a multi-year project to enhance and restore the original longleaf pine savanna on our properties in East Texas, to the very different environment of the Strzelecki Ranges in Victoria, Australia. Among these mountains, we are working with leading conservation bodies to augment the health and number of local koala populations.

In New Zealand alone, we have four separate projects to protect Brown Kiwi, New Zealand falcons, Whio ducks and Hochstetter’s frogs. Each of these threatened species face highly individual challenges, requiring specialist responses from our management teams on the ground to protect habitats and encourage population growth.

What makes vertical integration particularly beneficial to land management?

A vertically integrated model that blends both investment and property management aspects has several advantages, and we took this approach to ensure that our commitment to sustainability carries through from investment strategy to on-the-ground execution.

Research, integration and active management can enhance alignment of interests, reduces agency costs and increases our capacity to deliver value while focusing on three core thematic priorities: climate, nature and people. Our foresters have a huge responsibility, which requires a holistic approach to land management. Science and innovation work alongside traditional ecological and silvicultural knowledge.

A regenerative approach to land management drives our deep focus on partnerships and community outreach. When stewardship, education and programming are prioritized, the industry can grow and diversify. Our team of foresters manage not only our lands, but also the programs and partnerships that help achieve our end goal of bringing innovative land management practices to the over 5.5 million acres we manage globally.

These ripple effects can affect communities in ways that are seen and unseen. Our operations help sustain rural communities by providing both jobs and tangible outputs. We may manage a finite resource, but I believe in the infinite benefits that our passion for sustainable land management practices can have for communities and the environment.

How can technological advances impact revenue potential?

Revenues could be boosted by a variety of technologies. Forest management technology is evolving rapidly and these solutions include geographic information system mapping, LIDAR laser measurement to increase the accuracy of timber inventories, more accurate carbon yield projections, machine learning with satellite imaging, and remote verification and monitoring. These can all improve operational productivity.

In Brazil, we have begun a pilot project to apply herbicides for site preparation using drone technology in areas that would typically use agricultural tractors. Initial results demonstrate a dramatic reduction in chemical and water demand alongside lower costs and a smaller carbon footprint.

Technology can also improve safety. In New Zealand, we have installed cameras in all our trucks that cart logs. These use face tracking algorithms to immediately alert our fleet management center to the risks of fatigue and distraction events for our drivers.

How can investment in local forests help boost economic stability and prosperity in local communities?

Supporting and strengthening local and indigenous communities in which we operate means providing rural employment opportunities, public use of our land and support for local causes. We allow public access to nearly all our global forests, with opportunities for hunting, fishing, hiking, camping and more.

We assist communities on a location-specific basis, such as our beehive program to help local growers in New Zealand access high quality Manuka sites. This initiative has boosted non-traditional forest revenue and is particularly important because of the fragile state of the New Zealand honey industry, which has been impacted by parasitic mites and poor weather.

In addition to our nearly 700 global timberland employees, we hire contractors from local working families for our harvest and hauling operations. Many of these families live and work near the lands we manage, ensuring that dollars stay in local communities. We also have a special site protection program to safeguard areas of our property that are culturally, historically or geologically unique.

As a manager of a diverse set of properties around the globe, how does innovation and research foster responsible forest management?

We often say that in many ways, trees are like people – with enough food, water, light and protection from the elements, they are usually healthy. While a changing climate can affect forest health, so can an experienced forester. Advances in precision silviculture provide the tools and technology that allow us to make site-specific management decisions to improve product quality, reduce waste and increase profits all while protecting the environment.

As leaders in forest management, incorporating new information and technologies into operations increase capacity to add value and is intrinsic to our continuous improvement process. Our local foresters are continuously evaluating our forests at the stand and landscape level because investors rely on our modern forest management techniques to retain, grow and harvest forests that will be equally healthy in 30, 40 or even 50 years from now.

How are research collaborations and partnerships affecting how managers think about climate change impacts?

We view collaboration as a cornerstone of our business, working extensively with university and sector lead co-operative research programs such as the MIT Joint Program on the Science and Policy of Global Change. These allow us to collectively pool resources to answer the key research questions of today and tomorrow.

We focus on forest improvement, productivity, health, and growth and yield, to develop new industry-wide sustainability reporting standards to better understand and amplify impact. All of this informs our management practices using the most current science and enables us to tailor our species selection and management approach for each property, producing healthy forests and yielding the highest degree of adaptation and resilience.

We are proactively investing in ­precision delivery of fertilizer and limiting herbicide use by using piloting drone technology and on-the-ground sensors. As new-climate-related threats emerge, we will adjust our management plans, such as planting lower densities of native trees in hurricane-prone areas.

In a traditional timberland investment model, forests are managed to create sustainably sourced wood products. Where else do you think managers can add value to timberland investments?

We have always managed our timberlands for more than just their timber value. Across our global forests, we evaluate strategies for sequestering carbon, ensuring long-term protection of sensitive habitats, and creating additional environmental and social impact through non-timber activities such as leases and recreation opportunities with the aim of providing attractive risk-adjusted returns for investors. Managed forests provide tremendous ecosystem benefits at all stages of development, which helps us add value to timberland investments while simultaneously providing mitigation opportunities for unique species and habitats.

Forests are natural carbon capture and storage machines, and we are proud of the many carbon credit projects that we have established. Investors receive financial support from emitters while we manage the forest as a natural carbon sink. The nature of timberland investment often means that some years are better for harvest than others from a traditional market standpoint. What we gain through carbon projects is greater optionality – the ability to leave timber on the stump for carbon capture – and this gives our investors additional opportunities to generate value. These projects have historically been opportunistic in nature and have represented a small component of our overall traditional investment program, although we see great promise going forward.

There are many other unique opportunities to add conservation value. For example, in Florida, we are working to provide a forever home for the gopher tortoise, one of the oldest living species on earth.

We have reduced overall tree density to allow more sunlight and reduced the understory of small trees and shrubs through mulching – replicating a natural pattern that has benefited gopher tortoises for millions of years.

Today, our land management practices are helping this species by maintaining its unique habitat. Our conservation banks will soon also sell credits in exchange for accepting relocated tortoises. It is a great example of a win/win for both our investors and an endangered keystone species.