Basic Policy

Characteristics of Forest Assets and Forest Investments

Forest assets are tangible assets characterized by their uniqueness as a sustainable natural capital—trees continue to grow regardless of economic conditions. Forest assets are considered to have a low correlation with the price fluctuations of traditional financial assets, such as stocks and bonds, and have therefore been chosen as alternative investments from a risk diversification perspective. In general, forest investment is conducted through forestry funds, funds established and managed by fund managers specializing in forest investments that are known as TIMOs*¹. This investment approach has developed and matured since the 1980s primarily in the United States. In simple terms, a forest fund is a scheme in which capital entrusted by investors is used to acquire and manage forest assets, and the returns generated through forest management are returned to the investors.

Contributing to Global Climate Change Mitigation

Driven by international frameworks, such as the Paris Agreement, efforts to achieve carbon neutrality are accelerating globally. Amid these global trends, forests, which are recognized as one of key nature-based solutions (NbS)*², are increasingly valued for their role as carbon sinks, and their importance continues to grow in the pursuit of a decarbonized society. One concrete example of this is a carbon offsetting mechanism for companies to purchase carbon credits generated through appropriate forest management to offset their greenhouse gas emissions that they were unable to reduce to net zero despite their reduction efforts.

Engaging in the Forestry Fund Business

Since its foundation, Sumitomo Forestry has been engaged in forest management for many years, starting with its company-owned forests in Japan. It has also built a track record of forestry management in Southeast Asia and Oceania. Building on this expertise we have cultivated to date and aiming to contribute to global climate change mitigation efforts, we took a step in setting up our own forest fund business by establishing a forest asset management company Eastwood Forests, LLC (hereafter EF) in October 2022.

*1Timber Investment Management Organizations

*2Nature-Based Solutions: Actions to protect, sustainably manage, and restore natural and human-modified ecosystems in ways that effectively and adaptively address societal issues while simultaneously providing benefits for the well-being of humans and biodiversity (the definition provided by the International Union for Conservation of Nature)

Forest Value Creation through Reforestation

Japan Forest Asset, a joint venture between Sumitomo Forestry and Sumitomo Mitsui Trust Bank, is engaged in the reforestation of harvested sites. Since its establishment in January 2024, the company has developed the business proactively, by acquiring harvested forest sites mainly in the Kyushu and Tohoku regions and implementing reforestation programs in many locations.

Features of the Business

Japan Forest Asset acquires harvested forest sites where no reforestation plan is formulated or implemented, in pursuit of the circular forestry business model. Combining Sumitomo Forestry’s expertise in forest management and Sumitomo Mitsui Trust Bank’s financial knowledge, the company aims to achieve a total of 3,000 ha reforestation area by 2030. It plans to utilize the J-Credit system* to secure earnings for profitable forest management, with an eye to forest fund formation in the future.

Addressing Social Issues

In Japan, every year, large-scale logging projects are implemented on around 60,000-70,000 hectares of forest land while reforestation work is conducted for no more than 30,000 hectares, resulting in the national reforestation rate remaining as low as 50-60%. Major reasons behind this situation include forest owners having lower motivation for forest management and unclaimed and abandoned forest land. As a way to address this issue, we are developing this business to improve the value of forest sites suffering from inadequate management while helping create forest-derived J-credits and expand their market.

Enhancing Regional Cooperation

On October 1, 2025, Japan Forest Asset concluded a comprehensive cooperation agreement concerning forestry with Kinko Town Office (Kimotsuki District, Kagoshima Prefecture) and Osumi Forestry Cooperative. The agreement aims to transfer multi-functional forest resources appropriately to future generations by the three parties working together, principally to relieve the burden of expenses for reforestation by encouraging the utilization of the J-Credit system with the aim of attaining a 100% reforestation rate while developing workforce and creating employment in the forestry industry.

We are planning to expand the network of similar regional cooperation frameworks to many locations, in pursuit of sustainable forest development and regional revitalization at once while accelerating reforestation activities in collaboration with local communities.