October 19, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Australian global forestry and ag investment manager New Forests and its partners – British International Investment (BII), Norfund, and Finnfund – have agreed to launch a dedicated African fund – the African Forestry Impact Platform (AFIP) with subscription agreement commitments of $200 million. 

This official launch follows a prior announced intention by the partners at COP26 in late 2021 to scale and transform the sustainable forestry sector in sub-Saharan Africa. At the time, the partnership did not reveal under what framework this endeavor would take shape. But an aim was expressed to build upon the existing commitments to sustainable forestry that each organization carries, along with New Forests’ track record in scaling investment and climate finance in forestry into new geographic and marketing channels.

Africa is home to 17 percent of the world’s total forests (636,639,000 hectares) and 20 percent of its tropical forests. However, as the continent experiences unprecedented population growth and growing demand for wood products as economies mature and strengthen, these critical ecosystems are under increasing pressure from deforestation and the loss of biodiversity.

Approximately 60 million people are directly dependent on the continent’s forests, and about 60 percent of the continent’s total population is indirectly dependent on them. However, from 2015-2020, Africa lost 4.4 million hectares of forest per year. This deforestation intensifies the effects of climate change and signifies the critical need for conservation and the protection of biodiversity. 

Last November, the partners recognized these realities, stating that it is evermore critical that timber production becomes more sustainable, and forestry and landscape management practices improve so as to combat climate change and to create nature-positive outcomes for the region.

Drawing on New Forests’ novel approach to sustainability, AFIP will focus on affecting impact through four channels: climate change mitigation, biodiversity conservation, gender and diversity, and community and livelihoods.

Managed by New Forests, AGIP will continue to raise long-term institutional capital to support the sustainability and development of Africa’s growing forestry sector, with the ultimate goal of raising $500 million over the next two-to-three years.

“Africa has growing economies and rising timber demand but is also home to some of the world’s most biodiverse forests,” said David Brand, CEO, New Forests. “New Forests’ new Africa platform will expand the plantation forest sector while seeking to also support forest conservation, restoration of degraded land, and expansion of community-based forestry programs. As an open-ended investment vehicle AFIP will help to create and perpetuate sustainable landscapes that can balance conservation and production systems.”

AFIP will invest in a portfolio of plantation forestry operation companies and related assets across sub-Saharan Africa, primarily targeting established assets that have expectations of providing stable and predictable cash flows across a diverse range of markets. 

“BII is proud to be part of this partnership to launch a permanent capital vehicle that will increase funding for nature-based solutions, increase the supply of sustainable wood, restore natural capital while also boosting jobs within rural communities,” said Clarisa De Franco, managing director and head of private equity funds, BII.

“Addressing the climate emergency in Africa must include gender-smart actions, and we are thrilled that the fund has committed to invest at least 30 percent of the value of its portfolio in 2X eligible businesses,” De Franco noted. “This will promote inclusive economic opportunities, increase productivity and improve livelihoods across Sub-Saharan Africa.”

Already taking action, AFIP has made its inaugural acquisition of Green Resources, the largest forest development and wood processing company in East Africa. After experiencing a series of challenges, Norfund and Finnfund became majority owners of Green Resources in 2019. Since that time, the company has turned around, now posting positive results. The capital received from Norfund and Finnfund from the sale of the company is being reinvested in AFIP, which is also receiving capital commitments from the other partners. 

Tellef Thorleifsson, CEO of Norfund, said, “As long-term investors in Green Resources, Norfund is pleased that the board and management has succeeded in developing the company into what will now be the core of the new fund focused on developing sustainable growth of the African forestry sector, thereby creating jobs, reducing deforestation, and addressing climate change.”

Jaakko Kangasniemi, CEO of Finnfund, added, “Sustainable forestry is one key way to curb deforestation as well as climate change. Investing in responsible forestry companies has long been one of Finnfund’s focus areas.”

“In addition to the benefits to nature and climate, forestry can significantly contribute to people’s livelihoods – particularly in Africa. The forestry sector in Africa has enormous growth potential and by partnering with fellow development financiers and New Forests, we believe we can together bring the change needed to unlock that potential.”

Working closely with AFPI in the form of technical assistance will be Partnerships for Forests, a UK Foreign, Commonwealth, & Development Office funded program that will help identify and develop business models around target investments that demonstrate a different mode of working with plantations in order to provide tangible returns to investors, and deliver social and environmental value to smallholders, as well as other landscape stakeholders.

“The partnership with New Forests is exciting, given how innovative the investment model is in terms of social inclusivity and environmental protection,” said Baemnet Aschenaki, regional director of Partnerships for Forests, East Africa.

“By supporting the identification and development of smallholder-focused and environmentally responsible projects around plantations, we aim to contribute to resilient communities and landscapes on the continent.”

~ Lynda Kiernan-Stone is editor in chief 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 Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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