Drought, as a significant risk to Scottish forests, is likely to be exacerbated by the changing climate. This report summarises the current state of research, describes ongoing projects and identifies knowledge gaps and potential research directions. Considerations around the policy and practice implications are made, taking into account the available information.

Key findings

• There is high confidence that especially in east, central, and south Scotland the direct effects of severe droughts are likely to be felt primarily in forest productivity and carbon sequestration. 
• Tree species are known to differ in their vulnerability to drought impacts. The productivity of Scots pine, Douglas fir, and Sitka spruce can be heavily impacted by severe droughts. Trials of different species provenances have shown that there can be as large a variation in drought susceptibility between provenances as between species.
• Drought effects are the result of the complex interplay between climate extremes, many different components of forest ecosystems and other biotic and abiotic disturbances. All these elements will be affected by climate change in ways that cannot be confidently projected, which makes predicting the interactions between them even more difficult.
• There is medium confidence that applying dendrochronology (the study of annual growth increments, or tree rings) alongside remote sensing and drought indices could help understanding of the risk of large-scale drought impacts.

The process of risk measurement aims to quantify and measure risk over and above that which is expected i.e. it focuses on unexpected/catastrophic loss rather than expected/average loss. Risk management cannot eliminate risk but aims to take action to reduce the likelihood of risks occurring and to reduce the impact when they do.

This report looks at what lessons the Scottish forestry sector can learn from risk measurement and management approaches used in the financial sector.

We discuss a number of financial risk measurement and management approaches suitable to Scottish forestry, and consider how the approaches taken to measure and monitor risk, and the experiences of the finance sector – particularly during the recent financial crises – provide many lessons for the forestry sector as it seeks to adapt to the challenges of climate change.

Whilst many of the approaches outlined in this document are about reducing financial loss to the sector to ensure sector activities are preserved and supported, there are some lessons for wider preparatory approaches, and financial security itself will be an important factor in the resilience of the sector.