When we look at the daunting capital gap required to address climate change and biodiversity loss, private equity is often viewed with skepticism, criticized for prioritizing rapid, short-term returns over long-term planetary health. But can the mechanics of private capital be fundamentally re-engineered to protect nature?
To find out, I sat down with Peter Stein, Managing Director of The Lyme Timber Company.
Founded in 1976, Lyme Timber focuses on conservation-oriented forestland investment. Managing roughly 1.3 to 1.5 million acres of third-party certified working forests across the U.S. and Canada, the firm has permanently protected over 900,000 acres of land through highly structured, permanent conservation easements and unique ecosystem services, blending timber harvesting with carbon sequestration and wetland mitigation banking.
Peter Stein joined Lyme Timber in 1990. A graduate of UC Santa Cruz and a former Loeb Fellow at Harvard University, Stein is also the co-founder of the Conservation Finance Network and the International Land Conservation Network.
In this candid conversation, Stein pulls back the curtain on how private equity can design long-duration vehicles, navigate changing regulatory landscapes under the Clean Water Act, and manage the delicate balance between high-yield timber production and “forever wild” biodiversity habitats.
1. How does a private equity fund reconcile a short-term, 10-year investor exit timeline with the multidecadal ecological timeframes required for genuine forest regeneration?
That structural tension is actually what catalyzed our shift. We have done five 12-year term funds, but fund six is an open-ended, evergreen fund for exactly that issue. It is a long-duration fund where we expect we will retain the assets and provide liquidity or redemption pathways for the investors.
In the past, if you had a traditional term fund, all of the assets had to be disposed of and sold by the end of the fund’s term. That was how a portion of the capital was returned, while the remaining capital was returned through the operating revenues associated with those assets.
But with the exception of maybe radiata pine in New Zealand, no tree species grows quickly enough to fit that model. There is no natural consistency or connection between biological cycles and a 10 or 12-year term fund. That is why our new flagship capital vehicle is a long-duration fund.
2. Does the pressure to hit an Internal Rate of Return (IRR) target by year 10 ever force harvesting schedules that are suboptimal for long-term ecosystem health?
No, it does not, for two main reasons. First, all of our forestry operations are third-party certified under strict sustainability standards. If we were to adjust our harvesting schedules simply to chase short-term financial targets, we would risk losing that certification status immediately.
Second, the vast majority of the forestland we acquire is also subject to a perpetual conservation easement. These legally binding agreements permanently restrict the intensity and volume of what can be cut, completely eliminating our ability to engage in that kind of suboptimal harvesting.
3. Critics of the voluntary carbon market argue that many improved forest management (IFM) projects over-credit baseline scenarios—essentially paying landowners not to cut trees they were never going to cut anyway. As an asset manager who blends traditional timber harvesting with carbon credits, how does Lyme scientifically prove ‘additionality’ on properties like the newly acquired 2,800 acres in Western Massachusetts without cannibalizing your potential saw-log revenue?
To be clear, the property we acquired in western Massachusetts is strictly for pure conservation purposes. Because of that, we will not be pursuing active forest management on that land, nor will we be pursuing any kind of carbon crediting.
Regarding the broader question on additionality, our historical carbon credit projects have all been built for the compliance California market rather than the voluntary market. We believe the compliance market is quite a bit stronger and more robust, with far stricter requirements dealing with permanence and additionality than even the improved voluntary market. As a result, we have intentionally stayed on the sidelines and have not been a player in the voluntary markets.
4. If baseline standards tighten globally to require stricter proof of an immediate logging threat, does the financial model for blending carbon and timber remain viable?
Maybe. Part of the issue comes down to the price per ton of CO2. I think, and hope, that the quality improvements in the various protocols will make buyers more comfortable paying higher prices per ton. If that happens, there will be a strong economic justification for implementing advanced protocols—like dynamic baseline activities—to rigorously support additionality. However, at current pricing levels, at least within the voluntary market, the math doesn’t quite work. That is precisely one of the primary reasons we continue to stay out of that market.
5. In hyper-remote regions, how much of an easement’s appraised ‘development value’ is a realistic economic threat versus a regulatory lever used to de-risk investments with public funds?
Easements are based on fairly rigorous real estate appraisals, and that appraised development value is discounted for both risk and time. Because of that, I don’t think we get overpaid in any way.
All of the easement valuations that we do have to comply with the very strict requirements of state and federal agencies. It is important to emphasize that these are not syndicated easement donation transactions; these are purchased easement transactions using public money. Consequently, the rigor of the appraisal review process is quite high at both the state and the federal agency level.
6. What did Lyme’s coordinated liquidation of its wetland and stream mitigation bank portfolio across the US South signal about the regulatory stability of ecological credits?
That is another good question. The U.S. Supreme Court narrowed and constrained the definition of what qualifies as a regulated wetland under the Sackett v. EPA decision. While that occurred about two and a half years ago, the wetland and stream mitigation credit market in the U.S. remains highly robust, operating at about a $3 billion a year scale.
The Supreme Court ruling did not eliminate federal regulation; it simply narrowed the specific landforms that qualify. Essentially, it took isolated wetlands out of the compliance regulatory scheme. However, larger, intact wetland systems and connected water systems are still heavily regulated under the Clean Water Act.
Regarding our recent sales across the U.S. South, we did not actively market or put those assets up for sale. Instead, we were approached directly by a Texas-based buyer who had raised a new fund focused principally on those types of assets. One of their team members had previously worked on some of these specific mitigation banks and possessed specialized knowledge about them. Ultimately, it was a smoothly negotiated sale that we were very happy with, though we would have been equally happy to continue owning and managing those assets.
7. In Europe, the conversation around natural capital is shifting toward passive rewilding and letting natural processes take over completely. In contrast, Lyme’s philosophy is rooted in the ‘working forest’—maintaining human management, roads, and timber extractions. From a conservation biology standpoint, what are the ecological limitations of a working forest easement?
There are limitations, and I can give you a clear example of how we address them. We structured a very large working forest conservation easement on the Connecticut River Headwaters property in northern New Hampshire. The Connecticut River starts right at the US-Canadian border and flows 400 miles all the way down to Long Island Sound.
Because some of the land within that massive boundary consisted of high-elevation, ecologically sensitive habitats, the easement actually zoned about 20% of the property away from any kind of active management. You could call it a “forever wild” easement on that 20% portion, while allowing sustainable, active timber management on the remaining 80%.
So, areas with high biodiversity attributes, challenging topography, or critical habitat for threatened and endangered species may not lend themselves to an active logging strategy. When we do acquire those kinds of sensitive lands, we typically execute one of two strategies: we either refine the conservation easement to establish a “forever wild” zone over that specific area, or we sell that portion of the land outright to a conservation organization or a state or federal natural resource agency.
8. What functions do we lose when an investment mandate requires a forest to remain economically productive?
We are managing forests that have already been managed for a very long time. Because of that, I would argue that we are actually, in many ways, improving the ecological function of the forest through active management.
We do not own old-growth forests, nor are we looking to harvest them. The forests we acquire have been managed going all the way back to indigenous times, when native communities shaped them with both active management and controlled fire, and we are essentially continuing that practice.
If we were high-grading the forest, over-harvesting, or failing to abide by the strict sustainability criteria of the Forest Stewardship Council (FSC) and the Sustainable Forestry Initiative (SFI), then I think you would see a loss of function. But under our approach, I am completely comfortable that we are improving the ecological condition of the forests we own.
9. With institutional capital making up a larger share of your latest fund, how do you prevent traditional fiduciary pressure to maximize returns from diluting your strict conservation standards?
We are not owned by a financial institution, so we don’t face pressure to dramatically increase our assets under management (AUM). We have been very consistent with our strategy for the last 30 years.
Because of that track record, we don’t get that kind of pressure from our institutional investors. LPs invest with us with a clear knowledge of our past performance. Furthermore, as limited partners, they have no governance role; they do not get to comment on or influence our specific acquisition plans or forestry methodologies. So far, they have been very happy with both the financial and ecological returns.
10. Lyme recently collaborated with the Sustainable Forestry Initiative (SFI) and university researchers to map songbird habitats and track biodiversity data. As an asset manager, how do you translate these raw biological metrics into financial risk reduction or a premium that institutional investors actually value?
There is actually a modest premium available right now. Some of our log takers and end users pay us a financial premium for harvest products that come off our lands because the vast majority of our acreage is dual-certified under both the Forest Stewardship Council (FSC) and the Sustainable Forestry Initiative (SFI). We see those direct premiums in markets like Michigan and New York.
Beyond direct premiums, this biodiversity data actively shapes our on-the-ground management plans to mitigate environmental risks. For instance, standard state Best Management Practices (BMPs) might only require a 25-foot buffer next to a stream, but we might use our songbird and habitat mapping data to expand that setback to 1,000 feet to protect a sensitive breeding corridor. Similarly, that data helps us identify specific, fragile portions of a property where we should restrict operations entirely to frozen-ground, winter-only harvesting to eliminate any serious risk of erosion or streamside habitat damage.
As for translating these metrics into distinct financial assets, we are still at the very early stages of what you might call “nature credits” or “biodiversity credits” in the United States. That space is far more advanced in Europe and the UK. While this raw biological data could potentially back those kinds of credits in the future, that compliance market doesn’t really exist yet in the U.S.
11. Lyme Timber recently celebrated its 50th anniversary, and you have noted that the conservation finance field is growing highly sophisticated with tools like environmental bonds. Looking ahead to the next 50 years, do you see private capital eventually making public funding for land conservation obsolete, or will public tax dollars always have to serve as the bedrock of large-scale deals?
I think there will always, always, always be a need for public money, particularly for the permanent preservation of land. Even with the emergence of nature credits or biodiversity credits providing an additional income stream, I don’t think they will ever completely replace state, local, or federal government funding.
If you want to dig further into that dynamic, there is a remarkably robust database called LandVote (landvote.org), maintained by the Trust for Public Land, which tracks all the public conservation finance ballot measures and funding available at every level of government in the United States. We use that resource extensively to assess where we should be investing, ensuring that there is a reliable pool of public capital available to fund the conservation easements or fee-simple acquisitions we plan to execute.
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