The Australian Government’s “Green Bank” is ramping up investment in the country’s forests as it looks to nature-positive assets to drive one million tonnes of carbon abatement over the next decade.
It comes as investment in forest assets is booming, with global banks looking to productive forestry, “combining a large-scale sustainable investment with compelling risk-adjusted returns.”
Yesterday, the Australian Clean Energy Finance Corporation (CEFC) became one of the principal backers of a new fund, the “Australia New Zealand Landscapes and Forestry Fund,” with $450 million invested into a $600 million New Forests “forest and ag fund.”
The investment from the CEFC, believed to be a $75 million position, fulfils a clear mandate by the state-owned investment house “to facilitate the achievement of Australia’s greenhouse reduction targets.”
Significantly, the investment also guarantees that “native forests are not harvested” and that “forestry operations comply with the highest globally recognised sustainability standards,” which is “an added attraction for the CEFC.”
In recent months, Wood Central has reported that Australian financial markets have distanced themselves from native forestry – amid a global push to develop “nature-positive” financial instruments and Australia’s COP15 commitment to a global biodiversity framework.
However, Wood Central understands that the latest commitment by the CEFC is the first time Australia’s “Green Bank” has also distanced itself from harvesting state-owned forests.
“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,” according to CEFC’s head of natural capital, Heechung Sung, who spoke to the AFR.
“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.”
The CEFC strongly supports forest assets and forest-based products as a climate solution, and in early 2022, launched its AU $300 million “Timber Building Program” to “accelerate the use of mass timber construction across Australia.”
That program led to a $70 million investment into T3 Collingwood, Hines Global Real Estate’s first mass timber building in the Australian market.
According to David Shelton, New Forest Managing Director for Australia and NZ, the fund will convert hardwood plantations to softwood plantations, with long rotations having higher carbon abatement potential.
He said there is an economic rationale to growing more softwood, with Australia’s softwood plantation estate at a 20-year low, driving Australia to become a net importer of structural timbers.
However, Mr Shelton said Australia needs a “viable carbon credits market to grow the structural timber market,” with New Forests fielding weekly inquiries from investors wanting to participate.
New Forests, the world’s second-largest forest manager, is well-placed to capitalise on the surge of interest in ecosystem services – which will only grow over the coming years.
Last week, Wood Central reported the New York Stock Exchange is eyeing establishing a “natural asset” exchange, described as a new take on ESG – and has led political leaders and economists to speculate if conserved forests could be more valuable than managed forests with a change to carbon methodologies.
As for the new Australia New Zealand Landscapes and Forestry Fund, Mr Shelton said the fund’s investments would include up to 20% in agriculture and “new and emerging markets”, including “carbon, biodiversity, and renewable energy such as solar and wind”.
