December 21, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Global investment manager of nature-based real asset and natural capital strategies New Forests is ahead of the curve. It was in December 2022 that it announced the launch of its new Australia New Zealand Landscapes and Forestry fund (ANZLAFF) with the goal of raising A$600 million (US$404.73 million) over the next two-to-three years. 

“The risk of climate change is driving strategic asset allocation decisions of the world’s largest investors. We believe that investing in the land and forestry sectors is crucial in leading the transition to a sustainable future,” said Mark Rogers, senior managing director, Australia, New Zealand, and the United States, New Forests, upon the launch of the fund. 

Now, only one year later, New Forests announced the first close of ANZLAFF at approximately A$450 million (US$304.4 million) in capital commitments from Australian and European institutional investors including Swedish pension fund Andra AP-fonden (AP2); German pension group Bayerische Versorgungskammer (BVK); the Australian Government’s Clean Energy Finance Corporation (CEFC); and an Australian and a German insurer. 

“We believe there is no credible pathway to net zero without investment in the forestry and land use sectors, and we are pleased both new and existing investors are taking an important step in continuing the transition to a sustainable future,” said David Shelton, managing director, Australia and New Zealand, New Forests. 

Kathrin Kalau-Reus, head of private equity, infrastructure & timber, BVK, stated, “We are  pleased to renew the partnership with the experienced team at New Forests. Being a longstanding  investor in the forestry sector, the asset class contributes to environmental sustainability by supporting responsible land management and afforestation initiatives.”

“This supports our belief that aligning our business practices with sustainable and responsible principles leads to a positive and lasting impact on the environment and shows attractive returns.” 

With this dry powder, ANZLAFF intends to provide institutional investors with access to integrated forest, land, and agriculture markets in Australia and New Zealand, targeting investments into core forestry plantations in selected regions. These investments will exist alongside processing and logistics company investments, and some exposure to primary agriculture commodities. 

Reaching further, the fund aims to maximize the value of the entire landscape by positioning investors to benefit through best practices across forestry and agriculture, while integrating additional revenue streams such as carbon, biodiversity, and renewable energy such as solar and wind projects. 

Further enriching its mission, the fund has set additional targets, including carbon abatement through the establishment of new greenfield plantations and the conversion of existing plantations from short-rotational hardwood to longer-rotational softwood in Australia. 

“Since New Forests launched its first fund 13 years ago, the market is now seeing a clear shift from  investing in narrow mandates around forestry and agriculture alone, to include a wider set of considerations and returns,” said Shelton. “Investors globally are now thinking about the role of forestry, agriculture, and land use transition in not only delivering returns, but reducing emissions, contributing to conservation, and the circular bioeconomy.”

Building upon the experience gained and successes achieved through its previous strategies, which collectively manage A$4.8 billion (US$3.25 billion), the ANZLAFF is New Forests’ fourth round Australia and New Zealand strategy.

“We are pleased to work with an experienced global manager in the forestry sector to target the  ambitious carbon sequestration and sustainability measures through this investment, which is part of our broader drive into natural capital,” said Heechung Sung, head of natural capital, Clean Energy Finance Corporation (CEFC).

“Natural capital assets offer significant opportunities to contribute to the decarbonisation pathway for Australia and to build competitive new industries for our net zero future. These require a long-term investment focus. The sooner we act, the greater the economic benefit and the more opportunity we have to mitigate the worst effects of climate change.” 

Underlying New Forests’ investment approach is its Responsible Investment Framework – guiding principles that work to ensure that investments are aligned with the interests of the communities in which New Forests invests and with the needs of its clients. These initiatives include: delivering certified sustainable forestry; sustainable agriculture; increased natural climate solutions by reducing carbon emissions and increasing carbon sequestration; supporting the bioeconomy where renewable wood fiber replaces fossils-based materials; and reconciliation action plans.

“AP2 made its first investment with New Forests in 2010 and we are pleased to partner with a manager who shares our view on long-term and sustainability as well as forests’ crucial role in mitigating climate change,” said Jessika Ingvarsson, head of forest and agriculture investment, AP2.

“With AP2’s long term investment horizon, it is important to consider climate aspects in investment decisions,” continued Ingvarsson. “The forest industry has the unique opportunity to both reduce fossil use by replacing it with renewable products and at the same time increase carbon storage in growing forests and play an important role in Natural Climate Solutions.”

~ 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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