Effective Forest Management Is A Hot Topic
Over the past few years, headlines have constantly popped up on our collective newsfeeds informing us of new records set for heat, wildfires, and droughts across the globe. Driven by climate change, these are not the types of records we want to be setting. As we dig deeper into the worst recorded drought in U.S. history, 68 large wildfires scattered across the West are currently active. According to the National Interagency Fire Center, over 1 million acres of land are burning, and that number is expected to rise as more heat waves provide a ripe environment for fires to ignite. Although 85% of wildfires across the U.S. are caused by humans — generally from unattended campfires, debris burning, equipment malfunctions, cigarettes, and arson — dry, hot weather provides tinder and allows these fires to flourish, according to the National Park Service.
While wildfires cause a large toll on humans, businesses, and property, they have historically been net positive for biodiversity and ecosystems. Fires clear away dead matter that otherwise prevents nutrient access. In addition, nutrients are subsequently released from burned material; some plants even require fire to germinate. Animals rely on fires as well, and native species have adapted to avoid and survive them. In fact, the Karner Blue butterfly caterpillar consumes the wild lupine plant, which would not grow without fires due to “overhanging plants that would outcompete it for needed sunlight,” writes the National Geographic. However, the pace and scope of climate change threatens to eliminate fires’ positive benefits. In a study conducted from 2010 to 2014 by researchers at Colorado State University, the proportion of burned sites that lacked regrowth doubled over the last century due to the sheer intensity of recent fires in abnormally dry areas.
According to the U.S. Department of Agriculture, 28% of all private forests in the U.S. (about 124 million acres) are owned by corporations. Although these corporations have timber products on 32% of these 124 million acres, only 23% of these acres have management plans that are vital to both ensuring the preservation of diversity and managing wildfires.
The primary method that forest owners have used to control wildfires is indeed to create fires, ironically. Controlled burns do what wildfires are meant to do on a smaller scale in a way that simulates naturally occurring fires. Unfortunately, experts have created a prescription that was reliant on outlying weather conditions; droughts limit controlled burn usage because dry weather can permit fires to spin out of control. Pile burnings are more common in dry areas and in managed forests, as they involve gathering and burning natural debris and debris from felled trees, but they impact significantly less ground. The other method involves wider spread burns across a tract of land. Planning and managing a large-scale controlled burn is costly, even for large companies.
Another method of stopping wildfires is by setting up fire breaks, or thin swathes of land that are devoid of vegetation. Although one would think that breaking up vegetated land would harm biodiversity by disrupting ecosystems and preventing animal movement, a study conducted in the Loskop Dam Nature Reserve in South Africa showed no decrease in biodiversity when fire breaks were present. However, in this particular study species composition of the broken land differed from the covered land. This study also focused on grasslands rather than forests. Accordingly, forest managers that implement preemptive fire breaks must continue to monitor species to minimize biodiversity harm.
UPM-Kymmene Oyj, the largest forest and paper company by market cap and the company with the highest biodiversity score in Karner Blue Capital’s proprietary industry model, provides a compelling example of effective fire management. Not only are the majority of its forests certified to PEFC or FSC standards, which require forest fire prevention, monitoring, cooperation with professional agencies, and raising fire awareness among local communities and employees, but it also has a history of well-orchestrated controlled burns. UPM’s forest managers create 1-4-meter-wide fire lanes to ensure the fires do not escape their prescribed area, and its comprehensive road networks can easily accommodate fire brigades in case of an emergency.
As climate change worsens and large, uncontrolled wildfires become increasingly common, companies who are landowners must take strong preventative measures. Not only will forests grow more effectively from controlled burnings, but human life and property will also be protected, and biodiversity will thrive.
DISCLOSURE: As of the date of this blog, Karner Blue Capital (“KBC”) held positions in UPM-Kymmene Oyj on behalf of its clients. Securities issued by the companies identified or described in this blog do not represent all of the securities purchased, sold or recommended by KBC for its advisory clients, and readers should not assume that investments in the securities issued by the identified companies were or will be profitable. KBC and some of its partners may hold positions in certain securities issued by the companies identified in this blog in corporate and/or personal accounts. As fiduciaries, KBC prioritizes its clients' interests above these corporate and personal accounts to avoid any conflict of interest in trading these commonly held securities.