June 28, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

APG, the largest pension provider in the Netherlands, with approximately €583 billion (US$695 billion) under management as of April 2021, is planning to expand its investment in forestry and agriculture from its current €1.8 billion (US$2.15 billion) to €3-€5 billion (US$3.58-$5.96 billion) over the coming five years. 

In support of this intention, APG has doubled its dedicated investment team, expanding teams based in New York and Hong Kong, according to Vittor Cancian, natural resource portfolio manager, APG, who told Real Assets, “It’s important for us they are close to local markets as they need to have their own network and feel the local dynamic. That’s not only important to be able to select the right investments, but managing assets also works better if you’re close to the land you own.”

Currently, APG’s investments in the asset class are allocated to row crops such as soybeans, wheat, and corn, with additional exposure to permanent crops including vineyards, and fruit and nut orchards. The balance of the holdings are in forestry, mines, and energy, however, the manager is actively eliminating its exposure to mines and energy.

APG’s main client is APB, which views ag and forestry as an investment channel through which to meet its sustainability goals while also earning annual returns of between seven and nine percent.

On behalf of APB, APG invests exclusively in forestry and ag, and last month the pension manager announced a major deal to acquire a large production forest in Chile on behalf of its client.

The structure of the deal included a consortium of partners that included APG on behalf of APB, the Timber Investment Group (TIG) of South American investment bank BTG Pactual, and the Canadian British Columbia Investment Management Corporation (BCI).

Together, these participants formed a new joint venture with an investment allocation of $385.5 million – and are acquiring a production forest spanning over 80,000 hectares (197,684 acres), making this new venture the third-largest timber production in Chile.

“The Timberland Investment Group has been looking for an opportunity to strengthen our presence in Chile for over a decade now,” said Gerrity Lansing, head of TIG and partner at BTG Pactual.

“This transaction will provide us with the economies of scale we were looking for and meets our high requirements in terms of sustainability,” he continued. “We are delighted to be investing in this project together with BCI and APG, two of the world’s leading institutional investors.”

The Draw of South American Timberland

APG is not the only major investment manager to recently announce a significant investment in South America forestry.

In March of this year, Hancock Natural Resource Group (HNRG), a company of Manulife Investment Management, acquired 12,874 hectares (31,812 acres) of eucalyptus plantations in Mato Grosso do Sul, Brazil, through its affiliate Sempre Verde Florestas e Agricultura Ltda, from AMATA, through AMATA subsidiary APEI Plantio de Floresta Exotica S.A. (APEI).

Concurrently, like APG, Manulife expanded its impact investing and natural climate solutions team through the creation of the new role of managing director, Impact Investing and Natural Climate Solutions at HNRG. This role was filled by Eric Cooperström, who will oversee the sustainability and responsible investing capacity for the group’s timberland and agriculture teams.

HNRG already has a presence in Chilean timberland as part of its overall 5.6 million acres of timber holdings across the U.S., Canada, New Zealand, Australia, Brazil, and Chile, and its 400,000 acres of prime farmland across the major agricultural regions of the U.S., Canada, Chile, and Australia.

This deal added more than 30,000 acres of eucalyptus plantations established by AMATA in 2012 to supply the growing demand from the bleached eucalyptus kraft pulp mills, which are proximal to the timberlands.

All of AMATA’s forestry operations are FSC certified, and the company operates according to the best practices of environmental, social, and corporate governance (ESG) through sustainable and profitable management to bring its engineered wood products at scale to the civil construction sector in Brazil.

Much of Brazil’s managed eucalyptus plantations provide raw materials to mills for paper production. However, the market is expanding, with eucalyptus log exports from Brazil growing by 122 percent from 2017-2018, with 89 percent of those exports going to China, according to data gathered by Forest2Market Consultants. And as deforestation becomes an ever-more critical global concern, demand for sustainable wood is growing as well – with Brazilian eucalyptus gaining particular attention as a substitute for exotic woods from the Amazon.

– 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@globalaginvesting.com.