

Christophe Lebrun, head of forestry investments at AXA Investment Managers – Real Assets, speaks with Agri Investor about the strategy behind October’s purchase of a 958-hectare forest in France, the firm’s investment preferences and the appeal of forestry to the firm and its investors.
Last October, AXA IM – Real Assets bought, on behalf of its clients, Domaine de Saint Augustin, a 958-hectare forest in France. Could you elaborate on your strategy and how this acquisition fits in?
Our forestry strategy, conducted on behalf of our clients, is based on a pragmatic approach. The first driver for us and our clients when investing in this sector is to comply with environmental, social and governance (ESG) criteria. For AXA IM – Real Assets specifically, we see it as an important consideration when investing in both raw materials and real estate.
The second driver is diversifying investment in Europe, especially within the euro-zone, to avoid too much concentration and to mitigate risks, such as currency risk. In line with the geographical diversification strategy of our clients’ portfolios, two years ago we completed the acquisition of five forests in Finland. We are also looking at opportunities to invest in other regions, which would require us to adapt our strategy slightly.
Another key factor is the quality of the forests and their characteristics. We aim to strike a balance between the resinous and broad-leaf tree species, as both have their individual market cycles. Depending on the demand, sometimes we’ll see broad-leaf is fetching a high market value, when resinous is not and vice versa. The two species complement each other and we focus on finding the right balance.
Regarding the recent investment, St. Augustin produces very high-quality oak, a commodity that is in high demand. Over the past three years, the price of oak has increased and demand is expected to remain strong.
When you announced this acquisition, you mentioned that it’s located near a wood energy plant. Was that a decisive factor in your investment decision?
One of the things we consider when investing in this sector is the proximity between the forest and the wood processing facilities. Sometimes it’s difficult to sell the non-prime quality wood that remains after harvesting the logs. Having an energy biomass plant close to the forest is very beneficial because it is a good way to sell the rest of the wood.
What is your preferred method of investing? Is it through funds, separate accounts or co-investments?
Due to our expertise and knowledge of the sector, we favor direct rather than indirect investment, which allows us to better take advantage of market conditions. We adapt our investment and disposal strategy depending on these market conditions. We target long-term investment periods, usually for a minimum of 20 years.
Who are your clients and what do they look for when investing in forestry?
Our clients are AXA Insurance Companies. I think there are two main characteristics that make this asset class attractive to investors. The first is the ESG component; clients are increasingly focused on sustainability, and the green element, as well as the low carbon footprint of forestry activity, helps them to meet that goal.
The second point is the resilience of forestry in terms of performance due to its relative non-correlation with other asset classes. Wood material is also an inflation indexed product.
Overall, this asset offers [more] flexibility when compared with some other real estate asset classes. Depending on the market trends, we are able to properly manage our harvesting targets, without distorting the sustainable aspect of the investment. We think it’s a very interesting sector, as both improving technology and an awareness of the environmental benefits of environmentally sourced wood will drive future demand.