UK pension fund anchors Stafford’s debut carbon-offset timberland fund

Essex Pension Fund has agreed to become an anchor investor in Stafford Capital Partners’s debut carbon-offset timberland fund.

The UK local government pension scheme (LGPS) said it is committing £100m (€114m) to the Stafford Carbon Offset Opportunity Fund, which will generate carbon credits through the development of new commercial timberland plantations and the restoration of natural forests globally.

Stafford Capital already manages traditional timberland investments on behalf of Essex Pension Fund, but the new fund marks a move into carbon offsetting for both parties.

The vehicle, which is classified as an Article 9 impact fund under the EU’s Sustainable Finance Disclosure Regulation (SFDR), will seek to generate a financial return from commercial forestry as well as 30m verified carbon offsets, each equivalent to one tonne of C02, verified by recognised international carbon standards.

Stafford Capital has a US$1bn (€1bn) fundraising target and is expected to invest in around 200,000 hectares of sustainably managed timberland globally, including approximately 150,000 hectares on which new commercially managed plantations will be established and natural forest planted.

Essex Pension Fund, one of the 11 LGPS funds that make up the Access Pool, has invested in timberland since 2011 and said it has built a global portfolio equivalent to 816sqkm that can sequester the equivalent carbon emitted by over 420,000 cars per year.

According to its most recent annual report, the pension fund has £244m invested in the asset class. Towards the end of last year, it published a statement on climate change saying it was “dedicated to investing in reforestation and renewable energy” and that its exposure to both asset classes had increased from 4.1% in mid-2019 to 8.1% by 31 March 2021.

Susan Barker, chairman of the Essex Pension Fund strategy board and investment committee, said: “The fund was one of the first LGPS funds to invest in the timberland sector. Over the last few years, significant improvement in our funding position has allowed us to take the opportunity to implement our medium-term de-risking programme, which has resulted in the fund’s strategic allocation to this asset class increasing from 2% to 4%.”

Barker said the investment in the new fund “reinforces our commitment to being responsible investors and the general direction the fund is taking in regard to our aspirations to have circa 10% of the fund invested in impactful investment solutions that delivers both positive environmental and social benefits that would not otherwise happen, which not only aligns with our responsible investment policy and priorities, but our commitment to achieving net-zero targets in the future”.

Stephen Addicott, co-managing partner at Stafford Timberland, said: “We are very grateful to the Essex Pension Fund for its support of the timberland asset class over many years. We welcome them into our new carbon-offset opportunity fund, a strategy which we feel can make a meaningful contribution to the environment and society.”

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