Investment of £375 million by UK pension funds in Gresham House's forestry strategy revealed
London CIV and Wales Pension Partnership Invest in Gresham House Forestry Fund
A significant move towards sustainable and climate-aligned investments has been made by the UK Local Government Pension Scheme (LGPS) funds and an investment pool, collectively committing £375m to a forestry fund managed by Gresham House.
The London CIV Nature Based Solutions Fund, in partnership with Gresham House, focuses on forestry investments aimed at generating sustainable, climate-aligned returns through nature-based solutions that contribute to carbon sequestration and broader environmental benefits.
The fund deploys capital into high-quality forestry assets, leveraging sustainable forest management practices to enhance carbon capture and biodiversity, while producing long-term financial returns. The forestry investments typically involve sustainable timber harvesting combined with carbon credit generation, enabling the fund to generate revenue streams from both timber sales and carbon markets.
Elwyn Williams, chair of the joint governance committee of the Wales Pension Partnership, stated that forestry offers uncorrelated financial returns and measurable environmental benefits. Williams also mentioned that forestry in Wales will support environmental objectives, create rural jobs, and sustain local economies.
Vanessa Shia, head of private markets at London CIV, has also stated that forestry and greenfield assets have been at the forefront of the fund's strategy over the past year. Shia has emphasized that the pool's natural capital fund's target return is 6-8% net, with a 2% cash yield, which aligns with expectations for core forestry and agriculture strategies.
The first close of Forest Fund VI has been announced, with commitments from the £32.8bn London CIV, several funds within the £25bn Wales Pension Partnership, and an unnamed Japanese investor. The Gresham House forestry fund currently holds 6,000 hectares across 12 properties in Scotland and Wales.
The forestry fund managed by Gresham House is expected to sequester 4.7 million tonnes of CO2 over the next 25 years. Moreover, the fund generates income through sustainable timber harvesting, land value appreciation, revenue from renewable energy development and operation on the forest sites.
The fund's approach aligns with integrating natural capital into investment portfolios by prioritizing projects that generate positive environmental impact alongside financial returns, consistent with the growing trend of decarbonizing infrastructure and materials sectors globally. The strategy emphasizes ecosystem enhancement, carbon offsetting potential, and climate resilience, contributing to wider environmental goals such as mitigating urban flooding and supporting ecosystem services.
The London CIV, one of the eight investment pools within the LGPS in England and Wales, and the Wales Pension Partnership, a group of funds within the LGPS in Wales, have shown a commitment to sustainable and climate-aligned investments through their participation in the Gresham House forestry fund.
- This significant investment into the Gresham House Forestry Fund by the London CIV and the Wales Pension Partnership is a testament to their commitment towards environmental-science, as they focus on forestry investments that generate sustainable, climate-aligned returns and contribute to carbon sequestration and broader environmental benefits.
- In the context of climate-change, these investments in forestry aim to secure financial returns while also supporting environmental objectives in regions like Wales, creating rural jobs, and sustaining local economies.
- With expected returns of 6-8% net, the London CIV's natural capital fund, which invests heavily in forestry and greenfield assets, presents an opportunity for financing real-estate projects that are both financially viable and environmentally responsible, furthering the trend of integrating natural capital into investment portfolios.
