One million tonnes of carbon abatement targeted through first CEFC forestry natural capital investment
20 December 2023
A landmark CEFC investment in the forestry sector is targeting carbon abatement of one million tonnes over the next decade, harnessing the power of Australia’s natural capital to drive down emissions through sequestration and further showcasing the sector as a sustainable investment asset class.
The $75 million CEFC commitment to the Australia New Zealand Landscapes and Forestry Fund (the Fund) will support the development of new plantations, and the conversion of existing hardwood plantations to softwood plantations, where the longer rotation periods have higher carbon abatement potential. It will also invest in agriculture and downstream timber processing opportunities, with the majority of assets located in Australia. The fund will not harvest native forests and will ensure that all its forestry operations are compliant with the highest globally recognised sustainability standards.
The Fund will be managed by New Forests, a global investment manager of nature-based real assets and natural capital strategies. The underlying plantations will have the potential to generate additional revenue through Australian Credit Carbon Units (ACCUs), supporting the growing carbon credit market in Australia.
CEFC CEO Ian Learmonth said: “As Australia steps up its efforts to reach net zero emissions by 2050, we must tackle those sectors where the emissions challenge is greatest and capitalise on our competitive advantages, including our abundant and rich natural capital assets.
“This milestone CEFC investment commitment mobilises the forestry sector to help unlock the supply of carbon credits and accelerate carbon sequestration opportunities, ensuring we make the best use of our land as we decarbonise our economy.”
The CEFC investment is part of a $600 million equity raise that also includes German pension fund Bayerische Versorgungskammer (BVK), and one of northern Europe’s largest pension funds, Andra AP-fonden (AP2).
David Shelton, Managing Director, Australia and New Zealand at New Forests said: “Since New Forests launched its first fund 13 years ago, the market is now seeing a clear shift from investing in narrow mandates around forestry and agriculture alone, to include a wider set of considerations and returns. Investors globally are now thinking about the role of forestry, agriculture and land use transition in not only delivering returns, but reducing emissions, contributing to conservation, and the circular bioeconomy.
“We believe there is no credible pathway to net zero without investment in the forestry and land use sectors, and we are pleased both new and existing investors are taking an important step in continuing the transition to a sustainable future.”
As part of its investment commitment, the CEFC has spurred the inclusion of ambitious sustainability measures by the Fund to demonstrate decarbonisation strategies at scale. These include targeting investment in new greenfield plantations in Australia to further support carbon abatement activity, transitioning vehicles and farm machinery to electric or renewable fuels, working with suppliers to achieve Scope 3 emissions reduction and ongoing engagement to trial and promote emerging technologies to reduce emissions intensity in the sector.
CEFC Head of Natural Capital Heechung Sung said: “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. 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.
“We are pleased to work with an experienced global manager in the forestry sector to target the ambitious carbon sequestration and sustainability measures through this investment, which is part of our broader drive into natural capital.
“As we all transition to a low carbon future, the plantation forestry industry has an important role to play in the transition, by reducing its own operating emissions while also generating high integrity carbon credits which can be used by industry and high emitters to offset their carbon footprint.”
CEFC capital works to draw-in institutional capital and open up new avenues for capital to invest sustainably and magnify the impact of CEFC investments. In 2023 the CEFC and global investment group CDPQ created a new $200 million sustainable agricultural platform, Wilga Farming, to drive down emissions and improve sustainability in the sector. Managed by Gunn Agri Partners, the platform is helping to shape future sustainable agriculture and natural capital strategies to help Australian farming decarbonise while also boosting farm production.
Media release, 2023