Climate Risk Is Now Central

Master the Moment and Reach Your Peak with Defoes

"Wildfires now drive 43% of global tree cover loss, more than double the rate two decades ago. Forestry assessment must move beyond historic yield data to active fire management, species resilience and honest evaluation of insurance availability."

Wildfire, drought, storms, pests and disease are no longer peripheral forestry considerations. They directly affect biological growth, harvest schedules, insurance availability, carbon commitments and asset valuation. What was once assessed as an occasional operational disruption has become a structural feature of forestry economics, one that shapes underwriting, financing terms and long-term asset value as fundamentally as timber price or land quality once did on their own.

The scale of this shift is now clearly documented. University of Maryland researchers using satellite imagery found that forest fires between 2001 and 2025 now burn over twice as much tree cover each year as they did two decades ago and more than three times as much in tropical regions specifically. Globally, fires accounted for roughly 43% of all tree cover loss between 2023 and 2025, a sharp rise from an average of about 27% between 2001 and 2022. In 2024 alone, fires were the single leading cause of global forest loss, responsible for an estimated 4.1 gigatonnes of greenhouse gas emissions, more than double the emissions from all forest fires as recently as 2001.

This is not a uniform global trend; certain regions are driving the shift disproportionately. Extreme wildfires in Canada's boreal forests alone contributed materially to the 2023 spike in global tree cover loss and associated carbon emissions, illustrating how a small number of extreme events in specific geographies can distort global figures and, more importantly, concentrate losses within particular investment portfolios exposed to those regions. For clients holding or considering forestry assets, this regional concentration risk reinforces why aggregate global statistics must be paired with asset-specific geographic and species analysis rather than treated as a uniform backdrop.

Insurance markets are responding to this reality in ways that directly affect asset economics. In wildfire-exposed regions such as California, insurers have found it increasingly difficult to price and write coverage at all, creating what regulators and researchers describe as a genuine insurance availability crisis rather than simply a pricing adjustment. Conversely, research from The Nature Conservancy found that ecological forestry practices, including prescribed burns and thinning of overgrown vegetation, can reduce total insurance premiums by 41% for homes in treated communities, while also measurably reducing the likelihood of extreme wildfire events. This finding is significant for forestry asset management because it demonstrates that active fire-risk mitigation is not merely a cost centre; it can directly and measurably lower the cost of risk transfer.

A robust forestry assessment now considers species selection, fire management, access roads, water availability, regional weather exposure and geographic diversification, not merely historic yield projections. Adaptive forest management frameworks increasingly recommend selecting species and genetic stock better suited to anticipated future climate and fire regimes, maintaining structural diversity across stands to enhance resilience, and establishing fuel breaks and access infrastructure that both reduce fire spread and enable rapid response. These are not abstract environmental best practices; they are increasingly the operational features that distinguish an insurable, financeable forestry asset from one facing rising premiums, coverage gaps or diminished lender appetite.

For clients evaluating forestry exposure, the implication is that historic yield data alone is no longer sufficient due diligence. A credible assessment must incorporate forward-looking climate and fire-regime modelling, evidence of active adaptive management, and an honest appraisal of insurance availability and cost trajectory in the asset's specific region. Defoes helps clients build this more complete picture, connecting global climate-risk data with asset-level detail so that forestry decisions reflect the environment forests will face over their productive life, not only the conditions under which they were originally acquired.

Disclaimer: The content provided herein is for general informational purposes only and does not constitute financial or investment advice. It is not a substitute for professional consultation. Investing involves risk, and past performance is not indicative of future results. We strongly encourage you to consult with qualified experts tailored to your specific circumstances. By engaging with this material, you acknowledge and agree to these terms.