Values Beyond Timber: Pioneering Sustainable Forestland Investment with EFM

At The Russell Family Foundation (TRFF), we’re dedicated to accelerating the net-zero transition by investing in greenhouse gas sequestration and reduction through nature-based solutions and decarbonization technologies. Because nature-based solutions can be scaled quickly and significantly improve ecosystem health, we believe they are crucial to mitigating climate change. One of our investees, EFM Investments and Advisory, highlights the potential of using nature-based solutions to reduce the impact of climate change.

EFM is a commercial forestland investment manager pioneering sustainable management on private forestland through climate-smart practices.  EFM designs a “desired future condition” (DFC) for each forest property, driven by the belief that natural forests are worth more than the commercial value of the timber they produce. EFM invests in real assets, primarily forestland in the western United States, to create financial value as well as environmental and social impact. EFM is also one of the only companies of its kind in the US to be 100% employee-owned and majority women-owned.

A climate-smart FSC-certified forestry approach

EFM was founded in 2004 with the goal of creating a new approach to commercial forestland management. Its investment strategy prioritizes long-term social and ecological value alongside financial returns. The company’s approach considers the whole value of the forest, including timber, conservation, carbon, biodiversity, clean water, rural livelihoods, tribal values, recreational access, and more. EFM’s climate-smart management has extended  to more than 135,000 acres and its management creates tangible outcomes in the impact categories of stewardship, restoration, climate change mitigation, community development, and conservation.  

TRFF’s investment in EFM’s Funds II and III provided early support and capital to help launch both funds which has, in turn, helped the company achieve the sizable impact it reports today. These funds enabled EFM to acquire commercial forestland properties and transform the ecosystem using FSC-certified and climate-smart practices. Each property has a unique DFC that may include goals for timber inventory growth, high-quality timber production, ecosystem restoration, community uplift, recreation, and water quality improvements. The forest management plan produces financial returns for investors alongside benefits for local communities, such as increased biodiversity, clean water, conservation, jobs and recreational access.

Climate-smart forestry

EFM’s approach is described through the 5 Rs of climate-smart forestry: rotation, reserves, retention, restoration and relationships. These practices create more resilient, healthier ecosystems and long-term forest productivity, and enhance carbon storage, while establishing mutually beneficial connections with those dependent on the forest for employment, recreation, and food. 

The 5 Rs align with the Forest Stewardship Council (FSC) principles: in 2009, the company was awarded FSC certification and in 2023, all EFM properties received an FSC audit. The FSC is a global non-profit with the goal of uniting stakeholders to “protect healthy, resilient forests for all, forever” and oversees independent, third-party certification of adherence to its principles, standards and guidelines. 

The outcomes of EFM’s approach, in accordance with FSC principles, range from increased timber inventory of the forests to protection and restoration of forest ecosystems. The company also sequesters additional carbon in the forests it manages and monetizes this through the sale of voluntary carbon credits. 

EFM’s impact

Now in its 20th year of operations and over $250 million of assets under management and advisement, EFM has acquired 27 properties across Washington, Oregon, California, and Nevada. It works with regional partners on acquisitions, forest management and dispositions. This includes more than 650 miles of stream and 600,000 MBF (thousand board feet) under its management, across coastal, temperate rainforest, mixed conifer forest, estuarine, and alpine ecosystems. The company has also issued more than 600,000 carbon credits registered through the Verified Carbon Standard and the American Carbon Registry. Annually, these forests are sequestering more than 500,000 tons of carbon dioxide equivalent.

Once EFM establishes successful and sustainable forestland management, properties are sold to value-aligned buyers who will continue to prioritize holistic outcomes, including opportunities for Indigenous tribes to access their ancestral forestlands. So far, EFM has exited five properties: two were sold to Indigenous tribes, two to land trusts, and one to a state agency.

EFM’s commitment to sustainability and equity extends beyond its forestland management to the company itself. In 2012, EFM became one of the first commercial forestland managers to achieve Certified B Corp status, demonstrating its commitment to upholding the highest standards of social and environmental performance, transparency, and accountability. A decade later, EFM became employee-owned and majority-managed by women, highlighting its dedication to a mission-driven approach at all levels.  

Shifting traditional investment patterns

Although EFM has always believed the value of forests transcends the value of timber, the principles of traditional investment management focus more on maximizing timber value for financial returns. EFM has seen an increasing opportunity to shift this strategy based on changing mandates from investors, including foundations, who have net zero mandates and need options to mitigate the impact of climate change in their portfolios. 

Forests, which have attracted billions of dollars of investment capital worldwide, have a significant ability to sequester carbon. The bulk of this investment is held by large pools of institutional capital, so the benefits of investing in forests and timber are less known by foundation and family investors. In addition, investing in natural assets requires patience, with trees growing an average of 4-6% per year. EFM’s approach aims for permanent changes to the ecosystem, requiring a long-term strategy to create ecosystem recovery in commercial forests and patient, long-term capital, which is not always attractive to some investors. 

To change this and encourage investment in natural assets, investors need to re-evaluate how they measure risk and their impact on the natural world. As climate change becomes an increasing risk to financial performance and business operations, investors will be under growing pressure to mitigate these risks and reduce the carbon produced by their portfolios. Investing in sustainable forest management companies like EFM can help investors decarbonize their investments and reduce climate risk in their portfolios. Patient, long-term and risk averse foundation capital aligns well with climate-smart timber investment, giving investors exposure to the traditional attributes of this real asset while also creating a wide range of social and environmental impacts that may be aligned with a foundation’s grant making goals. 

TRFF is proud to invest in companies like EFM that are driving innovative and equitable approaches to environmental sustainability, as part of its commitment to invest in people and places to address the climate crisis. EFM’s creative approach to sequestering and reducing greenhouse gas emissions exemplifies TRFF’s investment strategy as we work towards a net-zero future. 

Other foundations should also consider how an investment in companies like EFM could complement their portfolio. 

For more information on TRFF’s investments, please visit its financial portfolio.