Campbell crafts timber tie-up in bid to enter carbon-offset market

The firm hopes its partnership with Bluesource will help generate additional income while raising forestry's profile among ESG-focused LPs, executives at the TIMO tell Agri Investor.

Campbell Global has sealed a strategic partnership with an advisor focused on environmental markets in an effort to brand the timberland asset class as a sustainability champion.

Under the terms of the agreement, which they described as the first large-scale partnership in the timberland investment management and environmental attribute markets, Bluesource will work with Oregon-headquartered Campbell to assess timber’s potential for income from carbon-offset credits and other environmental assets globally. The two companies will remain independent.

Speaking to Agri Investor upon announcing the tie-up with Utah-based Bluesource, Campbell’s director of business development, Jenny West, said LPs’ growing focus on ESG had been a boon to fundraising for timber vehicles over the past three years.

While some of Campbell’s investors have long been focused on ESG, West said, it is only in recent years that LPs have undertaken more comprehensive efforts to understand both the negative environmental consequences of their investments and their potential to drive a positive impact.

“For timberland, all of those ESG characteristics are so innate that they tend to be overlooked sometimes,” West said. “The Bluesource partnership enables us to be much more outward-facing about what has always been implicit in the asset class.”

Anticipating needs

According to a 2017 report from Forest Trends’ Ecosystem Marketplace, offsets equivalent to a total of 63.4 million tons of carbon dioxide equivalent (MtCO2e) were traded on voluntary markets for $191.3 million in 2016, an almost 25 percent drop from the year before.

Offsets derived from forestry and land use in 2016 predominated in Latin America and the Caribbean, according to the report. It also said the market for forestry-derived offsets is likely to receive additional support following the 447 “zero-deforestation” commitments announced by companies that source agricultural commodities including soy, timber and palm oil.

Ecosystem Marketplace posits that part of the decline in total offset volumes traded in 2016 was the result of a transition from voluntary to compulsory markets, such as the EU’s Emissions Trading Scheme and California’s introduction of a cap-and-trade system in 2013.

“Voluntary markets are a valuable testing ground for new types of emissions reductions and have also drawn important attention to non-carbon impacts from projects like biodiversity, employment, health and more,” the report said.

Stephen Levesque, Campbell’s managing director of operations, told Agri Investor that the firm came to know Bluesource in the course of bringing 9,000 of its timberland acres into a voluntary compliance program managed by the Northern California Air Resources Board.

While Campbell’s initial decision to pursue the partnership hadn’t resulted from explicit LP demands, Levesque said the continued development of California’s regulated market and the Paris Accord have since helped to spur investor interest.

Over the past decade, he added, demand for carbon offset credits has increased steadily, both through the introduction of mandatory markets for regulated entities, such as power plants, and growth in voluntary markets populated by a range of large corporates and other businesses with a focus on social responsibility.

“We’ve seen the opportunities with carbon evolving over the years in certain locations, to enhance the performance of those assets under management,” said Levesque. “Anticipating that need will continue to grow, we want to look very closely at future acquisition opportunities with an eye to that additional layer of value-creation.”

He explained Bluesource would provide technical expertise for developers in carbon markets and knowledge and relationships among offset customers.

In addition to helping assess the offset income potential of acquisition targets, West said Bluesource would help Campbell calculate the carbon footprints of properties already in its portfolio, translating that information into relatable data for investors.

Such data are increasingly useful for LPs, West said, particularly those pursuing their own ESG-focused initiatives. Key performance indicators Campbell has already provided its clients have included the number of trees planted and amount of carbon stored, according to West.