PotlatchDeltic has a comprehensive process to identify and evaluate a broad spectrum of risks including ESG risks. Senior management collaborates to identify and seeks to mitigate the effect of risks as part of our Enterprise Risk Management process.

PotlatchDeltic utilizes an Enterprise Risk Management (ERM) framework to identify, assess and mitigate significant risks facing the Company, including risks related to a range of environmental, social and governance topics. The Audit Committee of the Board of Directors and senior management have primary responsibility for the oversight of risks facing the Company. The material risks identified by the ERM process are reported in our risk factors section of our annual report on Form 10-K.

The risk assessment process includes evaluating the risk universe, emerging risks, and the risk attributes of likelihood, impact, velocity, and mitigation control strength. Risks are mapped into a matrix which identifies the significant risk areas for internal focus.

The Risk Committee Chair meets with the Audit Committee to discuss key inherent risks the ERM process has identified, current mitigation measures, and the resulting residual risks. This meeting also provides the Audit Committee members an opportunity to share key risk areas of concern to them. Results are shared with the full Board. As business leads prepare their strategic plans for the year, risks and mitigation measures are incorporated into their plans, as appropriate.

Specific risks related to environmental issues and climate change are identified, assessed, and mitigated where feasible as part of our ERM process. In addition, our Environmental Management System (EMS) and ESG review conducted annually at the business unit level evaluates business ESG risks and opportunities, including climate-related risks and opportunities.

The ESG Management Committee identifies and reviews climate-related risks across our business units. Risks are prioritized based on environmental and financial impact. PotlatchDeltic will continue to enhance its ERM framework for our businesses to identify and seek to mitigate emerging or shifting risks and opportunities. We are working to expand our climate risk management framework including the use of scenario analysis in line with TCFD recommendations.

Wildfires can occur because of lightning or human causes. While human causes are the source of over 87% of total fires, lightning accounts for over 54% of total acres burned. The U.S. West has seen an increase in fire size and frequency, driven by drought, high levels of federal or non-working forest ownership, and more remote acreage. In the U.S. South, weather, ownership, and access typically enable a more effective wildfire response. As climate change risks further increases in wildfire, mitigation measures and coordination across ownerships become increasingly important. Wildfire behavior can be influenced by weather, amount of readily combustible fuels, lack of moisture, and topography, and when the conditions are right, can increase fire severity and damage to the environment. The strongest mitigation tool for wildfire risk is to reduce the amount of fuel that is readily available in the understory, midstory, and overstory through thinning, prescribed fire, maintained fuel breaks, and strategically placed landscape-level fuels treatments. These timberland management treatments have also been proven to improve forest health and biodiversity benefits. In addition, a forest with age-class diversity changes the fuels and provides natural landscape breaks through younger stands.

Unmanaged lands typically have overstocked forests that provide significant ladder fuels, increasing the threat of crown fires. Ladder fuels provide continuous vertical fuels for the fire to climb from the forest floor to the canopy and become a crown fire. Insect and disease damage is also more prevalent in overcrowded forests, increasing readily combustible fuels. Crown fires are extremely challenging to stop using direct firefighting efforts and control is often accomplished through breaking fuel availability in the predicted path of the fire. This can mean the difference between a fire burning tens of thousands of acres in unmanaged timberland, compared to hundreds of acres in managed or working timberland. Efforts are underway to improve the forest health in unmanaged lands. Good Neighbor Authority enables federal land managers to enter into agreements with state governments to implement projects focused around restoring or improving overall forest health through treatments that target reducing hazardous fuels. Idaho Shared Stewardship establishes a policy for shared management by federal land managers with states, tribes, and other landowners to manage fire risk through a set of shared priorities. In addition, it calls for coordination among federal, state, tribal and local assets for wildfire prevention, suppression, and post-wildfire restoration, and for action to be taken to remove hazardous fuels and increase active management. Working forest owners are also engaging in policy solutions to review and update federal wildfire suppression with an eye toward improving interagency coordination and alignment around wildfire suppression, including decisions about initial attack, fire management, and the use of specific firefighting strategies.

In Idaho, we have implemented heightened measures to prevent fires, minimize damage from fires and to protect our timberlands from loss. In 2021, approximately 1,000 acres of our timberlands in Idaho and 500 acres in the U.S. South were impacted by wildfire. Overall, the state of Idaho had 1,332 fires in 2021 which impacted 439,660 acres of public and private land. In our four southern states of Alabama, Arkansas, Louisiana, and Mississippi, there were a total of 2,847 fires that burned a combined 70,398 acres.

We minimize insect and disease risks by actively managing forests to maintain their health and vigor. Vigorous stands of trees are resilient to attacks - virtually every major forest health epidemic has been caused by large extents of forests that were in poor health because of being overstocked and/or decadent.

Forest vigor and resilience is maintained through planning and implementation of forest management activities which include planting locally adapted species that are selectively bred to thrive in the location Governance - they are planted, judiciously controlling stocking density to ensure full site occupancy without be coming overstocked, maintaining optimum stocking levels as trees grow, controlling competing vegetation, utilizing harvest patterns to avoid large extents of single age classes, and actively monitoring insect, disease, and animal damage levels. Maintaining forest health through preventive measures is by far the most practical strategy to minimize losses from insects and disease and it is uncommon for us to need to use insecticides, fungicides or other direct insect and disease control measures.

Our utilization of locally adapted species that are selectively bred for site suitability, growth, and disease resistance is critically important to maintaining tree vigor throughout a 25 to 50-year growth period. The tree improvement programs that produce the families (genetic selections within each species) that we deploy on our timberlands all use regionally adapted seed sources and evaluate the progeny in the climate, weather, and pest environments where the families will be deployed. For instance, there are families of loblolly pine that are very resistant to a fungal disease, called fusiform rust, which causes cankers. The cankers can severely damage log quality and increase the likelihood of stem breakage during high winds. We plant seedlings with proven genetic resistance in areas where fusiform rust is known to be prevalent, and the incidence of the disease has been dramatically reduced.

The seedlings we plant are the result of selective breeding programs and we do not use genetically modified planting stock, nor do we plant non-native species. The number and spacing of seedlings we plant on each acre is based on local site conditions so that the site will be fully occupied. The site preparation and planting method utilized are based on our foresters’ experience and they adjust in response to local conditions and based on the success rate of prior plantings. Herbicides are used during the forest regeneration phase to control competing vegetation, which allows seedlings to establish quickly and reduces susceptibility to loss from pests or drought. As trees grow and fewer are required to fully occupy a site, we reduce their density through thinning using both precommercial and commercial thinning methods. This density control significantly lowers the risk of loss to insects and disease and distinguishes actively managed private working forests from less actively managed forests.

We plan harvest unit size and distribution so that we do not have large extents of same-age forests immediately adjacent to each other. The risk of loss from insects and diseases tends to increase as forest stands get older and site occupancy levels are maximized so having a mix of age classes significantly limits the spread of pests.

Throughout our timberland management initiatives, we monitor for pests, and we actively participate in external pest monitoring programs to determine the most appropriate management actions to minimize risks of loss and to maintain.