New Zealand’s sovereign wealth fund, the New Zealand Superannuation Fund, is one of several blue-chip investors betting large on Latin America’s forest industry. It comes as the Brazilian-based BTG Pactual Timberland Investment Group closed the second round (US $750m) of a multi-round forest fund, which has already reached US $1.24 billion.
BTG currently has more than US $6.9 billion in forest assets under management, spread across 3 million acres of timberland, and also has a separate fund pledging to raise US $1 billion as part of reforestation of degraded land in Brazil, Uruguay and Chile.
The investment, which focuses on “brownfield timberland assets” in Chile, Uruguay, and Brazil, is part of a wave of ESG investments in the region. BTG Managing Director and Head of International Markets Gerrity Lansing said that investor confidence is at a decade-high, with the average investment size being US $100m, investors primarily from Europe and the United States, including pension plans and sovereign wealth funds.
“The institutional investors that are allocating to commercial timberland today…are truly professional timberland investors. These are not typically first-time investors in the asset class nor the geography,” Mr Lansing said, who added that “this is not their first rodeo).
According to Mr Lansing, the latest investment is – behind the 2015 US $860m raise, amongst the largest timber raises in Latin America. The cap on investment is up to US $300m, and no single investor has more than 20% of the total fund.
“We just wanted to have as large a vehicle as possible to be able to differentiate ourselves in doing transactions,” he said, adding, “For an investment vehicle that is this size, there are opportunities to buy large assets that are very diverse, that are spread over large geographic areas, that have exposure to different end markets and different counterparties.”
Importantly, the investment also reflects improving sentiment in Latin America: “Brazil has had a deep recession, and there was some social unrest in Chile,” Mr Lansing said, adding that “it is also an asset class where they want to be with a local group, bottom line, that have an on-the-ground presence.”
The latest investment comes after Wood Central reported that global asset managers were now trading real estate for forests, with the newly published Nature Positive Framework shaping up as a game changer for big finance.
“Last year saw ‘natural capital’ manager searches for bfinance clients outpacing real estate manager searches for the first time,” according to Nikkie Howard, a senior associate in the consultancy’s private markets team, who found that 50 asset managers now provide natural capital strategies “with a forestry, agriculture, timberland or carbon credit-related theme, as well as some renewable energy themes.”
Increasingly, global banks are looking to invest in productive forestry, which now “combines a large-scale sustainable investment with compelling risk-adjusted returns.” That is, according to Ben Avery, Senior Manager from APG, one of three investors who secured Forico in one of the most significant investments in Asia-Pacific forest markets.
Last year, APG joined the UK Pension Protection Fund and UniSuper and is amongst a new generation of institutional investors now targeting forestry assets.
- To learn why global funds now eye forest markets for ‘compelling returns’, visit Wood Central’s special feature.
