Investments in forestry by the lifeboat fund for UK defined benefit pension schemes grew by 20% to hit £1bn (€1.2bn) over the last year.
The Pension Protection Fund (PPF) currently invests in soft and hardwood forestry assets globally, with investments in Australia, New Zealand, the US, the UK, Ireland, the Baltics and the Nordics.
PPF said that outside its sustainable investments through pooled funds, it now also invests around 30% of its forestry allocation through five direct and co-investments, including in the New Zealand plantation Wenita, the largest producer of timber in Otago with 30,000 hectares of sustainably managed forests.
According to the PPF, sustainable forestry assets are one of the few viable nature-based investment solutions in the journey towards a net-zero carbon world, while well-managed forests can also increase biodiversity and are more resilient to the effects of climate change.
“It’s fantastic to be continuing to grow our investments in forestry,” said Lea Dubourg-Hrachovec, PPF portfolio manager lead on the fund’s timberland, farmland and infrastructure investments.
“A well-constructed portfolio gives future optionality for us to play a bigger role in reducing carbon emissions and fighting climate change while delivering strong returns for our members and making our portfolio greener. The emergence of carbon credit trading backed by real assets, like forests, will see more investments being made into afforestation, encouraged by the Government.”
Last year the PPF seeded a new Scottish afforestation strategy that allows them to generate UK carbon credits directly, becoming one of the first UK pension funds to do so. It said its sector-leading approach had now attracted other pension fund investors who are looking to “generate returns that make a difference”.
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