September 16, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

Financial investors in Japan admittedly don’t have much exposure to forestry investments. However, the Development Bank of Japan (DBJ) is looking to foster a shift, beginning with its investment in the TIR Europe Forestry Fund II. 

With an executive leadership team averaging more than 25 years of experience and an extensive record of consistent, sustainable returns for pension funds and institutional investors, TIR Europe provides superior risk adjusted returns through the acquisition, management, and sale of forestry and related assets.

Managed by Atlanta, Georgia-based Timberland Investment Resources LLP (headed by CEO Mark Seaman) and its European affiliate Timber Investment Resources Europe LLC (TIR), which has AUM exceeding $1.65 billion (836,000 acres), TIR’s Fund II makes capital investments in mostly medium-sized forests in the southern region of the U.S.

In early August TIR Europe announced a successful close of its Forestry Fund II with $200 million in capital commitments. 

“TIR can offer institutional investors access to a solid asset class that offers good returns,” said GianPaolo Potsios, partner, TIR Europe, at the time. “Real assets such as timberland have a compelling role to play in an investor’s portfolio offering regular dividends as well as a solid source of alternative yield.”

Timberland is rapidly gaining credibility as a prime alternative investment for gaining environmental, social, and governance (ESG) benefits for portfolios. As such, demand for these kinds of sustainable alternatives continues to strengthen among the pension and institutional investor space as part of their broader commitments to climate change mitigation and sustainability.

Evidence of this growing demand by institutional investors for forestry assets has been abundant. Just since March:

~Hancock Natural Resource Group acquired acquired 12,874 hectares (31,812 acres) of eucalyptus plantations in Mato Grosso do Sul, Brazil.

~Apple partnered with Conservation International on the launch of The Restore Fund, a $200 million vehicle to invest in timber producing commercial forestry projects. 

~ Gresham House, the largest commercial forestry manager in the UK, launched the Gresham House Forest Growth & Sustainability strategy – intended to deliver sustainable capital growth via the creation of more than 10,000 hectares of new productive woodland. 

~ The INVL Sustainable Timberland and Farmland Fund II raised an additional EUR 18.5 million for a second close at EUR 51 million. 

~ APG, the largest pension provider in the Netherlands, announced its intention to expand its investment in forestry and ag from €1.8 billion (US$2.15 billion) to €3-€5 billion (US$3.58-$5.96 billion) over the coming five years.

~ BTG Pactual Timber Investment Group (TIG) acquired the management of two timber funds, (Fund III and Fund IV), with a co-investment interest in both vehicles from Olympic Resource Management (ORM), a subsidiary of Rayonier Inc., for an aggregate sum of $35.9 million. 

~ Global alternative investment leader AXA IM Alts made its first forestry investment, agreeing to acquire 24,000 hectares (59,305 acres) of Australian forest and the associated forest management business from investment funds advised by U.S.-based Global Forest Partners LP (GFP) through a deal valued at approximately $775 million.

And within only the past month:

~ Hancock Natural Resources Group (HNRG) acquired 89,800 acres of timberland in the U.S. state of Maine. 

~ And Roseburg Resources acquired 18,063 acres of timberland in Oregon, known as the Bandon property, from Catchmark for $100 million. 

A major factor driving the increased investment activity in the asset class is the UN’s Principles for Responsible Investment forecast that corporate demand for carbon removal and offsetting could represent $800 billion annually for investors by mid-century, along with initiatives such as the universal consideration of the SFI standard, which acknowledges the impact on the use of sustainable forestry practices on the capacity of working forests to sequester carbon and other greenhouse gas emissions.

For DBJ, this investment in TIR Europe is part of its larger initiative undertaking efforts to realize a sustainable society by working within its corporate philosophy to  “apply financial expertise to design the future: to open up new frontiers as we resolve the issues of our clients and the community while promoting sustainable development for Japan and the world.”

In line with these guiding principles, DBJ intends to offer financial support to efforts it sees resolving issues being faced by Japan’s food and agriculture industries. And stated that through this investment it hopes to bolster the material knowledge and skills of Japan’s financial institutions, and to play a role in contributing to the regeneration of the country’s forestry industry.

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.