July 12, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Sumitomo Forestry and Eastwood Forests (EF), a U.S.-based forestry asset management company co-founded in October 2022 by Alex Finkral, Glenn Wallace, and Sumitomo’s Forestry’s wholly-owned subsidiary Sumitomo Forestry America Inc., have launched Forestry Fund I with an initial contribution of 60 billion yen (US$427 million) from 10 Japanese companies. 

The first participants in this fund includes ENEOS Corporation, Osaka Gas Co., Ltd., Tokyo Century Corporation, Japan Post Holdings Co., Ltd., Nippon Yusen Kaisha, Ltd., Fuyo General Lease Co., Ltd., Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Limited, and Unicharm Corporation, who have invested in the fund through their U.S. subsidiaries. 

With a lifespan of 15 years, this fund plans to acquire and manage approximately 130,000 hectares (322,000 acres) of forests, mainly in North America, by 2027. EF will oversee the management of the fund including the acquisition and sale of assets, led by Alex Finkral and Glann Wallace, both having many years of experience implementing sustainable forest management in North, Central, and South America. 

From the Japanese side, SFC Asset Management, a wholly-owned subsidiary of Sumitomo Forestry, will support the fund regarding fund formation and communication with investors post-formation. 

Neutrality by 2050

The Paris Agreement, an international treaty adopted in December 2015 during the 21st Conference of the Parties (COP21) of the United Nations Framework Convention on Climate Change (UNFCCC) held in Paris, France, set a long-term goal of keeping global average temperature increases to well below 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels, and if possible, to limit the temperature increase to 1.5 degrees Celsius (2.7 degrees Fahrenheit). 

It has been determined that to achieve this goal, it is critical that we collectively reach carbon neutrality, meaning that global greenhouse gas emissions will need to be zero, by 2050.

The government of Japan also has made a pledge to achieve a carbon-neutral, decarbonized society by 2050, sparking the acceleration of efforts among the country’s companies to reduce emissions. 

Part of these strategies is the purchase of carbon credits to offset emissions that cannot be completely eliminated through technological innovation or business model revisions. 

It is within this framework that forests are important as CO2 sinks, as noted in the Glasgow Climate Agreement adopted at COP26 in 2021. Additionally, forests are not only a climate change countermeasure, but are considered Nature-based Solutions (NbS) addressing social issues and performing public functions such as conservation of biodiversity and water resources.

Currently, carbon credits are fragmented and are being issued by various certification bodies through both governments and the private sector using standards and calculation methods that are not internationally universal. 

However, there are expectations that in the future there will be a groundswell movement toward the creation of high-quality credit that encapsulates the unification of credit standards and a transparency of the process. 

With these factors in mind, Forestry Fund I will conduct sustainable forest management together with conventional management aimed at timber production for the purpose of selling the timber and to create credits to sell on the (more advanced) U.S. carbon credit market. It will create a credit creation methodology either through reforestation or conservation, etc. to enhance CO2 absorption and carbon fixation to create these carbon credits. 

It also will increase biodiversity by providing an environment where diverse organisms can thrive through optimal management. High Conservation Value Forests, or regions with high diversity and habitats that are endangered, will be protected in accordance with the standards of forest certification systems such as Forest Certification Standards (FCS) – an international standard for sustainable forest management.

Ultimately, through this fund, Sumitomo Forestry Group and participating companies will enhance CO2 absorption capacity of forests, generate new CO2 absorption of approximately 1 million tons per year, and contribute to the realization of a decarbonized society by creating and returning high-quality carbon credits while increasing the value of forests as natural capital solutions. 

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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