Investments by UK and Australian pensions institutions highlight forestry’s attractions for long-term investors seeking portfolio diversification and natural capital investment.
The UK’s Worcestershire Pension Fund and Australia’s NGS Super superannuation fund are anchor investors in Gresham House’s Sustainable International Forestry Strategy Platform, which has reached a first close of over €250m, according to the investment firm.
Gresham House said the investment by NGS Super, the first in one of its platforms by an Australian superannuation fund, marked an important step in globalising its natural capital platform. Worcestershire Pension Fund, a UK local government pension scheme (LGPS), is a previous investor in Gresham House forestry strategies. The size of the individual investments was not disclosed.
The new international platform will invest in a portfolio of sustainably managed timberland and afforestation assets with target allocations of 40% for Australia and New Zealand, 30% in Europe and a further 30% in afforestation investments which could be in either of those regions depending on returns and diversification requirements. It is classified as an Article 9 product under the EU’s Sustainable Finance Disclosure Regulation (SFDR).
Long-term investors such as pension funds view sustainable forestry investments as a way to diversify their portfolios, given the sector’s tendency to correlate with inflation dynamics over the long term, in addition to helping to fulfil commitments to invest in natural capital.
Heather Fleming, managing director, institutional business, at Gresham House highlighted the differing appetites of defined benefit (DB) and defined contribution (DC) pension schemes.
“Many LGPS have created circa 5% natural capital strategic allocation, and forestry has often been their first step to establishing that natural capital exposure. The appetite from DB corporate schemes has been more limited, given the majority are going to buy out. We are seeing increased interest from DC providers which we expect to increase over time,” she told Impact Investor.
Natural capital
Adrian Hardmann, chair of the pension committee at Worcestershire Pension Fund, explained why the investment made sense from his organisation’s perspective.
“Our commitment to the Gresham House Sustainable International Forestry Strategy Platform diversifies our existing exposure and reflects our conviction in sustainable real assets and our belief in the importance of investing in natural capital for the long term,” he said.
Ben Squires, chief investment officer at NGS Super, said: “As a strategy platform with a long-term horizon, sustainable forestry aligns with our objectives to achieve stable, risk-adjusted returns while contributing to global climate and biodiversity goals.”
Gresham House is the UK’s largest forestry investment manager, with €4.1bn in forestry assets worldwide. Its forestry strategies focus on sustainable timber production, carbon sequestration, biodiversity restoration, and rural economic development.
In May, Gresham House made a final close on its UK-focused Forest Fund VI, having raised £375m (€446m) from investors including the London CIV LGPS investment pool, South Yorkshire Pensions Authority and various Wales Pension Partnership member funds.
A 2024 report commissioned by Gresham House found that almost three-quarters of UK-based asset owners had made or were planning to make natural capital investments to support climate adaption, spurred on by the potential to deliver both financial and environmental benefits.
