November 26, 2024

By Gerelyn Terzo, Global AgInvesting Media

European bank BNP Paribas has entered the forestry fray. BNP Paribas Asset Management (BNPP AM) has introduced the BNP Paribas Future Forest Fund in response to global demand for sustainably managed timber investments. Launched alongside Copenhagen, Denmark-based International Woodland Company (IWC), the fund boasts a target size of $500 million with a hard cap of $750 million and has already secured $130 million as of November. With a strategy to shape future commercial forests, the partnership is the first of its kind between BPAM and IWC, the latter of which is majority owned by BPAM and specializes in natural capital.

Classified as Article 9 under the EU’s Sustainable Finance Disclosure Regulation (SFDR), the fund will pursue a strategy to deliver financial returns combined with sustainable investment practices that support climate and asset resilience while improving biodiversity. BPAM will target sustainably managed timberland investments throughout the U.S., Oceania and Europe. Its target composition comprises up to a dozen forestry assets in the U.S. across the South, Northeast and Pacific Northwest, as well as Australia, New Zealand and Europe. To be eligible, the assets must meet BPAM’s standard of being Forest Stewardship Council (FSC) certified or at least be certifiable, as portfolio managers plan to publish greenhouse gas accounting targets as well as other EU reporting needs to LPs.

BNPP AM Global Head of Finance, Strategy and Participations David Vaillant, who also serves as chairman of IWC, stated, “We are very pleased to partner with IWC and leverage their deep expertise in natural capital, ensuring that we make a meaningful impact in the world of sustainable forestry. The Future Forest Fund illustrates the common vision we have with IWC to actively contribute to the environmental transition. This new fund will enable us to answer our clients’ growing interest in this new asset class as we widen our breadth of natural capital solutions.”

Forestry assets are compelling for investors who are looking to align environmental and social benefits with financial returns that are uncorrelated to other asset classes. Forestry has the potential to generate attractive long-term risk-adjusted returns alongside a steady income stream while serving as an inflationary hedge. The UN Food and Agriculture Organization (FAO) predicts that wood demand will balloon by anywhere from one-third to 60 percent in the three decades leading up to 2050, fueled by a growing population, urbanization, rising per-capita income and the pivot to a more sustainable economy.

IWC CEO Otto Reventlow, said, “The BNP Paribas Future Forest Fund represents a significant step forward to bring sustainable forestry investment into the mainstream and recognizes timberland as a compelling investment proposition. With this fund, we ensure that our focus on commercial viability is balanced with a strong commitment to protect and enhance biodiversity and climate resilience. We are proud to collaborate with BNP Paribas Asset Management to create a fund that aligns financial objectives with the urgent need for environmental stewardship.”

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