A Scottish Government-owned investment bank has taken a £50million stake in a fund that will develop up to 8,000 hectares of forest in Scotland.
Scottish National Investment Bank (SNIB) has become a “cornerstone” investor in the Gresham House Forest Growth & Sustainability Fund.
The cash is the largest investment the Scottish National Investment Bank (SNIB) has made since its inception. The bank was set up late last year with £2billion of government funding over ten years to back innovative firms and projects that support ambitions to create a net zero economy.
Gresham House, which raised the fund, is the UK’s largest commercial forestry manager in charge of roughly 140,000 hectares of forestry worth more than £1.8bn. The business also manages a forestry mandate in Ireland and expects to complete on a further international forestry mandate in Australia.
The SNIB’s stake makes up about half the initial fund target value, although yesterday the asset manager confirmed its fundraise was oversubscribed as investors keen on burnishing their green credentials bought in. Gresham House confirmed it had raised £127m in subscriptions, exceeding its initial target of £100m.
The Alternative Investment Market (AIM)-listed group said the fund will support the planting of between 6,000 to 8,000 hectares of new forest in Scotland over the next two to three years. Using the money raised, Gresham House aims to acquire the land and hold for the long term to develop and support the forest.
The fund will generate returns by selling timber and through the capital growth of land and trees.
Investors such as SNIB are also expected to receive distributions in the form of verified carbon credits from the creation of new woodland. These can be retained for ‘insetting’ purposes – as opposed to ‘offsetting’ as it’s based on a real reduction in carbon – or sold to provide income.
The Gresham House project is predicted to capture 1.2 million tonnes of CO2 over 20 years. In addition to the environmental benefits of tree planting, the SNIB added that the investment would improve flood defence and air quality, reduce soil erosion and provide outdoor recreation areas as well as support existing and new jobs in rural Scotland.
A novel investment proposition
Eilidh Mactaggart, CEO of the SNIB, said: “Gresham House is an experienced forestry fund manager, and we are very excited to support them in this new venture.
“The new planting element and ability to generate carbon credits represents a novel investment proposition which mainstream investors have yet to fully embrace.
“The bank’s cornerstone investment is designed to encourage other investors to follow us into this new type of forestry fund. We therefore believe this opportunity to be an excellent fit for the Bank’s ambition to lead the way on innovative mission aligned investments.”
Scottish state investment to act as a ‘catalyst’
Olly Hughes, managing director, forestry for Gresham House, said: “This impressive first close is a testament to Gresham House’s long-standing track record in the forestry space and the bank’s cornerstone investment will help to catalyse further investment in this asset class from institutional and private client investors.
“This flexible strategy allows investors to choose to use the carbon credits generated for offsetting purposes or sell the units to create an income.
“As investors increasingly focus on sustainable investments, forestry is emerging as one of the most impactful solutions, which combats climate change and enhances biodiversity, while also serving as an excellent investment diversifier and producing meaningful uncorrelated returns.”
Founded in 1857, Gresham House is one of the oldest companies in London. It manages around £4.7bn of assets on behalf of institutions, family offices, charities and endowments, private individuals, and their advisers.
