CDPQ takes minority stake in Westervelt Ecological Services

Caisse de dépôt et placement du Québec has made a significant minority investment of an undisclosed size into Westervelt Ecological Services, a unit of Alabama-headquartered timberland manager The Westervelt Company.

WES was established in 2006 to develop and manage large-scale restoration and mitigation projects in collaboration with landowners, businesses, non-profits, land trust organizations and government entities. Headquartered in Tuscaloosa, it manages 35,000 acres of wetlands, streams and vulnerable species habitats in nine states across 50 projects designed to produce credits required to offset the environmental impact of development projects by the federal Clean Air and Clean Water Acts.

In November 2021, CDPQ and The Westervelt Company partnered for the acquisition of a 76,000-acre timber property in Georgia, intended as the first transaction of a timber platform focused on the US Southeast. That platform was designed to stand as one of several distinct verticals within the sustainable land management component of the C$401.9 billion ($295.7 billion; €276.9 billion) Canadian pension’s infrastructure portfolio.

Managing director and head of CDPQ’s sustainable land management team Nicolas Leyssieux told Agri Investor that the pension’s investment into WES grew naturally from the rapid success of their timber partnership and would stand as a distinct vertical focused on mitigation banking.

“We see ourselves as two aligned, long-term natural capital-oriented investors. Based on the current partnership we have already together, we are intending this partnership on a broad scheme,” he said. “The capital of CDPQ will help support and unlock the potential of WES to become a leader, if not the leader, in the industry.”

The Westervelt Company chief operating officer Matthew Cade Warner told Agri Investor that mitigation banking projects and the administration of regulations they seek to comply with vary significantly by US region. WES’s strategy, he added, is to pursue a variety of project and customer types, with US Southeast projects generally focusing on wetlands, streams and water-based projects.

In the Rocky Mountain region, the company focuses on opportunities related to water and habitat conservation, wetlands and stream projects, which account for the majority of potential projects on the West Coast.

Warner highlighted WES’s work on credits linked to construction of the California high speed rail project as indicative of the types of projects the company hopes to pursue with support from CDPQ.

“That really positioned us to be a leader in opportunities around infrastructure, specifically around clean energy in the West Coast but it has also led to opportunities elsewhere,” he said.

The increasing popularity of “turn-key” mitigation projects designed and managed in partnership with a specific private company or government agency is among the forces driving growth in the market, according to Warner. Also a factor, he said, is the increasing willingness of policymakers at all levels to partner with the private sector in “pay for performance” frameworks well suited to large environmental challenges, such as restoring Florida’s Everglades.

“That is one way that partnering with a large, reputable institutional capital provider like CDPQ allows us to participate in these larger scale opportunities that have become more prevalent over time. We expect them to become even more prevalent as funding comes out of the bipartisan infrastructure bill,” he said.  “Many of our largest peers are using third-party capital now.”

There has indeed been an infusion of institutional capital into mitigation banking over the past three to five years, according to Warner. He also echoed Leyssieux in saying the collaboration between CDPQ and The Westervelt Company quickly revealed an overlap in strategy between the two groups that they were eager to expand upon.

“The thing that really made us attracted us to them is that they share our long-term vision, our ethics, our values and our investment philosophy. It’s very hard for us to find someone who shares all of that,” he said. “We are a private enterprise and historically have not taken on partnerships, but we thought there was such alignment with CDPQ that we were interested to explore that opportunity. The more we learned, the more we liked them.”