Applying a Portfolio Approach to Your Land

Historically, landowners only get paid when something is extracted from their property like timber or crops. As the cost of carrying land and paying taxes rise over time, landowners have looked to conservation easements and land-use taxation policies as a way to lower that cost. The rise of natural capital gives landowners a new way of managing land, going beyond conservation, and ushering in the age of the restoration economy.

What exactly do we mean when we say natural capital? Natural capital is about putting a price and value on the ecological services your land is providing society. Whether your trees and soil are sequestering carbon, or providing critical biodiversity, or filtering and storing water, natural capital is about taking a wider view that creates value as your land grows.

In the extractive approach, many landowners are tempted to maximize production. This often comes at the detriment to the health of the soil and forests. But nature comes with benefits in its very creation, and both are a blessing to us. They are not to be taken for granted, as these benefits carry us forward in life. They, if anything, must be better costed.

So natural capital forces one to develop, at best, an optimization approach to land management. For example, a tree never was recognized on the balance sheet until it was harvested for paper or board feet. With the rise of the carbon market, you now have to ask, is the tree worth more up than down? By merely asking this question, you change how you manage your land. No longer are you forced to cut timber to pay your bills. As your timber grows year over year, the stock change difference is turned into carbon credits that have value to major Fortune 500 companies. Nature’s appreciation and mix actually start to help us use it in a better mix today!

One such example is our GreenTrees business. GreenTrees is the global leader in carbon reforestation credits selling to companies like Norfolk Southern Railway, Duke Energy, Microsoft, Shell, and many more. Our 600 landowners are now receiving money because their forests grew. The faster the trees grow, the more income landowners receive. Now, this does not mean that landowners never thin their stands. Actually, we encourage active management. So, periodic thinning enables landowners to diversify their income, where they get both timber and carbon revenue. All the while, we are growing a world-class forest. Timber and carbon are just part of the story.

It is time to think of land as your portfolio. Another example of this is our Conservation Plus business, the leading natural capital portfolio manager for landowners throughout the Southeast. Conservation Plus works with landowners whose holdings range from a few acres to 20,000 or more acres. We have created an approach to optimize conservation easements, nutrient mitigation banking, wetland and stream restoration with carbon sequestration income and balance against agricultural, forest management, and recreational uses.

From there, we developed out our Air-Land-Water “pro forma,” providing landowners a diversified plan to meet their objectives and risk tolerance. Just like a retirement advisor allocates X% to equities and Y% to bonds, we look at your land the same way. For some landowners, it might be wealth-building; for others, it might be paying off the mortgage, and for still others, it might be to endow the property for generations to come. Each plan is customized to the landowner and the land.

The tools at a landowners’ disposal are expanding, giving landowners more options and strategies for managing their land. This expansion of the landowner toolbox is ushering in the Age of Natural Capitalism while moving beyond conservation to the restoration economy. We are learning to put nature on the balance sheet by placing a price and value on our natural systems and the benefit they provide our communities and us. This gives new meaning to the adage of doing well by doing good.