Forestry is part of the decarbonisation story for Sweden’s second national pension fund.
AP2, a frequent investor in impact funds, is one of a handful of institutional LPs in New Forests’ Australia New Zealand Landscapes and Forestry Fund. The fund pursues a carbon abatement strategy as well as financial returns targets.
ANZLFF has reached a first close at “approximately A$450 million” ($307 million; €278 million), New Forests announced just before Christmas. Other investors include German pension fund Bayerische Versorgungskammer, Australian government-backed Clean Energy Finance Corporation, an Australian insurance company and a German insurance company.
“Forests [have a] crucial role in mitigating climate change,” AP2’s head of forest and agriculture investment, Jessika Ingvarsson, said in the announcement. “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 plays an important role in natural climate solutions.”
ANZLFF is a 15-year closed-ended fund with a A$600 million target. Fundraising will continue “over the next year”, although New Forests’ chief executive Mark Rogers told affiliate publication Agri Investor (registration required) in 2022 that the firm was targeting a final close by the end of 2023.
The fund will primarily invest in forestry assets, with some exposure to agriculture and infrastructure assets. It will achieve most of its returns from timberland harvesting, but “carbon, biodiversity and renewable energy such as solar and wind” may provide addition revenue streams, New Forests’ announcement states.
New Forests will pursue its carbon abatement targets “through the establishment of new greenfield plantations and the conversion of existing plantations from hardwood (short rotations) to softwood (long rotations) in Australia”.
New Forests is also in market with a US Forest Climate Solutions fund with a $400 million target, according to New Private Markets’ database. AP2 has previously committed to TPG’s Rise I, II and Climate funds, Just Climate’s industrial decarbonisation debut and BlackRock’s emerging markets-focused Climate Finance Partnership, according to New Private Markets’ database.