UK retirement funds pump £375 million into timber venture led by Gresham House
In a significant move towards sustainable investment, the UK Local Government Pension Scheme (LGPS) and an investment pool have collectively committed £375m to a forestry fund managed by Gresham House. This fund, named Forest Fund VI, is part of Gresham House's efforts to support biodiversity preservation and flood mitigation, aligning with broader Environmental, Social, and Governance (ESG) and Responsible Investment (RI) principles.
The fund has secured significant commitments from UK pension funds and other investors, indicating a strong financial backing for its initiatives. Notable contributors include the £32.8bn London CIV, several funds within the £25bn Wales Pension Partnership, and an unnamed Japanese investor.
The Forest Fund VI focuses on forestry investments that contribute to environmental sustainability, such as biodiversity conservation and flood management. By supporting reforestation and sustainable forest management, the fund aims to enhance carbon sequestration capabilities and contribute to decarbonization efforts. In fact, it is expected to sequester 4.7 million tonnes of CO2 over the next 25 years.
The fund's revenue generation methods include sustainable timber harvesting, land value appreciation, and revenue from renewable energy development and operation on the forest sites. As of now, the fund holds approximately 6,000 hectares across 12 properties in Scotland and Wales.
Elwyn Williams, chair of the joint governance committee, stated that forestry offers uncorrelated financial returns and measurable environmental benefits, including boosting biodiversity and carbon sequestration. Vanessa Shia, head of private markets at London CIV, added that forestry and greenfield assets have been at the forefront of the fund's strategy over the past year.
Gresham House, the fund manager, brings the expertise and proven track record needed to manage these assets responsibly and at scale. The fund's structure incorporates principles of good governance, ESG considerations, and responsible investment practices, aligning with the stewardship ethos of its investors.
The London CIV Natural Capital Fund's target return of 6-8% net and 2% cash yield are aligned with expectations for core forestry and agriculture strategies. This reflects the growing interest in climate-resilient investments among institutional investors, as demonstrated by the participation of UK Local Government Pension Scheme funds, London CIV, and Wales Pension Partnership.
In conclusion, the Forest Fund VI's performance is marked by its ability to attract significant institutional investment, support biodiversity, and contribute to climate resilience, reflecting a robust and sustainable investment strategy. Forestry, as a core asset class for the London CIV, offers a promising avenue for sustainable investment in the UK.
The Forest Fund VI, with a focus on environmental sustainability and climate change mitigation, has attracted substantial investment from UK pension funds, international investors such as the unnamed Japanese investor, and funds within the £25bn Wales Pension Partnership. By investing in biodiversity conservation and flood management, the fund aims to sequester carbon, decarbonize, and generate financial returns through sustainable timber harvesting, land value appreciation, and renewable energy development. This aligns with the London CIV's strategy, as demonstrated by their targeted 6-8% net return and 2% cash yield, reflecting the growing interest in climate-resilient investments among institutional investors like the UK Local Government Pension Scheme. Thus, forestry, as a core asset class for the London CIV, presents a promising avenue for environmental-science-based investment in real-estate.
