In the latest installment of the Stoel Rives | Deeply Rooted Podcast, titled Understanding the Intersection of ESG and the Forest Sector, MaryKate Bullen, Director of Sustainability and ESG of Forest Investment Associates, and Adam Dittman discuss perspectives on the role of environmental, social and governance, aka “ESG,” considerations in timber and forest sectors, including:
• Importance of ESG initiatives in assessing risk and adapting to changing physical and regulatory landscapes.
• Targeting a positive environmental outcome through impact forestry plans
• Prioritizing biodiversity in land management
• Climate impact of carbon removal - thinking beyond carbon offsets
For the season one finale of the Stoel Rives | Deeply Rooted Podcast, host Adam Dittman met with MaryKate Bullen, Director of Sustainability and ESG for Forest Investment Associates, to discuss the role of environmental, social, and governance, also known as “ESG,” considerations in the timber and forest sectors.
Setting the Table: The Parameters of ESG for the Timber and Agriculture Industries
The term “ESG” is becoming increasingly prevalent in the financial news, at industry events, and in business discussions surrounding investment and other transactions in the timber and agribusiness industries. MaryKate opened the conversation with Adam by setting a framework for what elements encompass ESG. “It seems sometimes that you could consider almost anything to sit under environmental, social, and especially when you include governance,” MaryKate said, adding, “basically it is the business responsibility you have to all of your stakeholders, whether [they are] the environment . . ., the people who are working for you, or the people who live near an investment, because things we do at an individual forest or farm level can matter to others.”
MaryKate further broke down the parameters of ESG commonly invoked in resource-based industries:
E: Pollution, climate impact, greenhouse gas emission, water management.
S: Stakeholders such as the environment, employees, and people who live near investments. Access to land for recreation also is a consideration. “Even where there are strong property rights, people do not like to see certain types of activities on hillsides, hilltops, or even by the highway they are driving along. This emotive aspect of land can mean there are social views of what private business is doing,” MaryKate said, noting that “‘S’ is also for safety. Are your workers or contractors working to a standard that is safe for them?”
G: Good corporate governance is highly correlated with investment performance. Topics that are rising in interest include diversity, equity, and inclusion. MaryKate said these topics raise “[q]uestions like, ‘Do you have a diverse board?’ There is good evidence that more diverse boards lead to better business performance. Are you doing things to be inclusive in the workplace? Are your practices supporting diversity and inclusion?”
“If we turn to why it matters, the core of ESG has always been started from a foundation of risk. Investors care about risk-adjusted returns. How do we make sure we identify and talk about how ESG can affect the value of our investments? Let’s consistently identify them to understand how to price those risks, mitigate them, and manage them. That’s really been the heart of it,” MaryKate added.
Implementing ESG Initiatives and Anticipating Regulation
Investors are asking more sophisticated questions around forest sustainability certifications and, in some cases, are starting to require it. Though not 100% universal yet, certifications can give extra assurances to investors that systems are in place to identify potential risks and manage against them happening.
MaryKate shared that even when certifications are not required, there are several benefits of adopting an ESG centric approach, saying, “If we anticipate regulation or some severe shock to the system is going to happen, I really do believe that those companies who are out there attempting, experimenting, trialing with ESG initiatives are going to be ahead of the game and how to adapt. They’re also going to be more likely to find an innovative solution. And if, and when, that regulation comes, I think they are going to find it easier to comply.”
To listen to this episode with MaryKate Bullen and future episodes, subscribe to the Stoel Rives | Deeply Rooted podcast at https://www.stoel.com/the-stoel-rives-deeply-rooted-podcast or on Apple, Spotify, Podcasts, or wherever you listen to podcasts. See less -
