Forest carbon offset projects are becoming a key tool in the fight against climate change. These initiatives generate carbon credits by preserving or restoring forests, which absorb CO₂ from the atmosphere. Investors can support these projects while potentially earning returns from the growing voluntary and compliance carbon markets. As demand for high-quality offsets rises, forest-based carbon assets are attracting capital from institutions, corporations, and retail investors seeking environmental and financial impact.
What are forest carbon offset projects?
These are projects that generate carbon credits by either:
- Avoiding deforestation (REDD+ projects)
- Afforesting/reforesting degraded land
- Improving forest management to enhance carbon sequestration
Each project undergoes third-party verification to measure how much CO₂ it removes or avoids, and issues credits accordingly (1 credit = 1 tonne of CO₂ equivalent).
Why invest in forest carbon offsets?
- Rising demand: Corporations seeking to meet net-zero pledges are buying offsets to neutralize emissions.
- Limited supply: High-quality, nature-based credits (like forest projects) are in short supply compared to demand.
- Diversification: Carbon assets offer a new alternative asset class with low correlation to traditional markets.
- ESG alignment: Offsets support climate, biodiversity, and social impact goals.
Investment pathways
1. Buy shares in carbon project developers or aggregators
These companies originate, develop, and monetize forestry carbon credits through project creation and trading.
Notable publicly traded companies:
- Rubicon Technologies (NYSE: RBT)
- Acquires and manages environmental projects including forestry credits
- Focus on digital carbon marketplaces
- Anew Climate (private, IPO possible)
- Large U.S. offset project developer, including forest-based credits
- Exposure via partnership deals or future public offering
- South Pole (private) and Carbon Streaming Corporation (NEO: NETZ / OTCQX: OFSTF)
- Invests in upfront capital for carbon offset projects, receives credits for resale
- Offers long-term revenue sharing from carbon generation
2. Invest in forestry and land-use ETFs or REITs
Some timberland and land-focused funds are gaining exposure to carbon credits as an added revenue stream.
- iShares Global Timber & Forestry ETF (WOOD)
- Includes companies like Weyerhaeuser and Rayonier that lease forestland for offsets
- Indirect exposure to carbon monetization via forest management
- CatchMark Timber Trust (merged into PotlatchDeltic)
- Managed forest assets with potential to integrate carbon strategies
3. Direct investment in forest carbon funds or platforms
Institutional or accredited investors can participate in private vehicles focused on carbon credit production.
- Climate Asset Management (a JV between HSBC and Pollination) – Focuses on natural capital and carbon strategies
- Terra Global Capital – Offers forest carbon investment products with REDD+ focus
- Pachama, Nori, Sylvera – Platforms verifying or offering access to carbon credits for individual or corporate buyers
4. Buy and trade carbon credits
Retail and institutional investors can directly buy carbon credits through:
- Carbon marketplaces:
- Toucan, Flowcarbon (tokenized credits)
- Xpansiv (CBL) and AirCarbon Exchange (ACX) for spot market trades
- ETNs and funds:
- KraneShares Global Carbon Strategy ETF (KRBN) — Tracks regulated carbon markets, not voluntary offsets but good for exposure
- SparkChange Physical Carbon EUA ETC — Physical carbon allowance exposure in the EU ETS
5. Partner or co-develop forestry projects (for institutional investors)
Pension funds, family offices, and ESG funds are entering project-level investments in countries like Brazil, Indonesia, and Central Africa to secure long-term offset supply and biodiversity benefits.
What to look for in a quality forest carbon project
- Verification standards: Look for credits verified by Verra (VCS), Gold Standard, or ART-TREES
- Permanence: Long-term forest protection with legal safeguards
- Additionality: Project would not exist without the carbon finance
- Co-benefits: Biodiversity, local livelihoods, water quality, etc.
- Monitoring and transparency: Regular satellite and field-based data reporting
Risks to consider
- Permanence risk: Fires, pests, or illegal logging may reverse carbon gains
- Verification risk: Weak or outdated methodologies may result in low-quality credits
- Regulatory uncertainty: Carbon markets are evolving, with potential for shifting rules and taxation
- Liquidity: Voluntary carbon credits can be illiquid compared to traditional financial assets
- Reputation: Scrutiny over “greenwashing” or ineffective offsets can affect credit value
Summary of best exposure methods
| Investment Path | Type | Accessibility | Liquidity | Risk |
|---|---|---|---|---|
| Public carbon project stocks | Equity | High | High | Medium |
| Forestry ETFs / REITs | Equity | High | High | Low-Medium |
| Private carbon funds | Private equity | Low | Low | Medium-High |
| Direct carbon credit trading | Commodities / crypto | Medium | Medium | Medium |
| Co-development / land acquisition | Direct project investment | Low | Very Low | High |
Forest carbon offsets are emerging as a valuable piece of the climate finance puzzle. Whether through equity, credits, or land-based investments, investors now have multiple ways to align portfolios with the carbon economy and global climate action goals.