​Folksam, KLP and FPK invest via Nordic forest fund’s €500m funding round

Sweden’s Folksam has committed a further SEK1bn (€95m) to the Silvestica Green Forest fund, the pensions and insurance group announced, citing the low volatility and sustainability as key attractions of forestry investments.

The forestry fund, which buys Nordic woodland to manage sustainably, said it has also raised capital from other existing investors including Norway’s KLP and the Swedish financial sector pension fund FPK in a €500m funding round that reached full subscription at the end of last year.

Michael Kjeller, head of asset management and sustainability at Folksam said: “Forest investments contribute to sustainable development and are also interesting from an investment perspective as it is a real asset with low volatility.”

Folksam first invested €50m into the Silvestica Green Forest fund in 2017, while KLP invested €23.9m a year later.

Silvestica Green Forest invests in forests near the Baltic Sea, mostly in Sweden and Finland, and has generated investment returns according to plan and continued to grow since its inception in the summer of 2017, according to Folksam.

“The investment in Silvestica Green Forest provides a good risk-adjusted return on the total asset portfolio, which is important for our customers,” said Kjeller.

The specialist fund has grown its assets to 54,000 hectares of forest land across the Nordic region, since its first investment back in 2017 in 7,000 hectares of woodland in Finland from Finnish forest industry company UPM.

Folksam said the new investment is being split across the group with SEK450m from Folksam Life, SEK110m from Folksam Sak and SEK450m from its municipal pension fund subsidiary KPA Pension.

Explaining the background to the call for capital, Silvestica Green Forest said business had developed faster than planned when it was launched in the summer of 2017, with total investments having grown to around €160m at the end of 2019 and which were distributed over 54,000 hectares.

As a result of the fast investment rate, it said an increased commitment from the investors became necessary.

All investors had responded positively to the funding call, the fund announced, with the €500m total commitment coming from the fund’s existing investors Folksam Group, KLP, Gamla Livförsäkringsaktiebolaget SEB Trygg Liv, and FPK.

A spokesman for Silvestica Green Forest said the fund was expected to deploy the new capital over the next few years.

“Roughly speaking, this means about 140,000 hectares of forest land distributed in the five countries around the Baltic Sea; Sweden, Finland, Estonia, Latvia and Lithuania, to compare with the 54,000 hectares we already own,” he said.