BTG Pactual subsidiary Timberland Investment Group has launched a forestry strategy alongside American nature-focused non-profit Conservation International.
The impact vehicle will target opportunities in Brazil, Uruguay and Chile that are conducive to restoration and reforestation.
TIG’s chief sustainability officer Mark Wishnie said Conservation International will serve as impact adviser to ensure the company is taking every opportunity to manage its assets in order to ensure they make the biggest positive impact, as well as lending expertise on conservation science and the restoration planning.
Wishnie said the demand for nature-based impact vehicles among institutional investors is largely unmet due to a lack of high-quality and large-scale strategies that can readily meet institutions’ compliance requirements and accommodate the size of commitment they need to make.
“There is a range of corporations which are entering the natural climate solutions world or nature-based solution space because they’ve made these significant [net-zero] commitments and they’re beginning to really act on them,” said Wishnie.
“But they’re finding that that almost inevitably leads them to consider investments in nature, which for many of them is a new area of activity. It offers one of the few opportunities to deploy capital into large-scale climate-positive activities today.”
Wishnie declined to disclose any details about the impact vehicle, including its fundraising target, expected IRR to be delivered, any capital commitments that have already been made or the length of its term. A statement from TIG did, however, say that the business will target raising $1 billion within five years.
Wishnie did disclose that, given it is a greenfield play, TIG is forecasting it will take “at least 15 years to really bring the strategy to scale and generate the benefits of the greenfield reforestation and restoration.”
The vehicle will initially generate returns by sustainably harvesting timber and generating carbon credits. Later years will involve acquiring primary processing facilities that will allow TIG to develop “forest products that are long lived, so they store carbon for long periods of time,” said Wishnie. “Or they can be products that substitute for more carbon-intensive alternative materials like concrete, steel or plastic, or that otherwise have other positive impacts on the climate. So the intent is to invest down the value chain.”
BTG Pactual partnered with the Nature Conservancy in September to put the two firms in a position to extract additional environmental value from TIG’s existing assets, while potentially delivering enhanced returns.
The global timberland industry recorded multiple deals in the summer involving institutional investors, with the combined transactions valued at roughly $1 billion.