Gresham House disclosed that English pension Worcestershire County Council Pension Scheme was among the LPs that helped the British firm hit its latest fundraising milestone.
It secured a £127 million first close on the vehicle in August. The Forest Growth and Sustainability Fund has a £300 million target and a third and final close is expected in Q2 2022.
The fund will acquire existing forestry to generate income and will plant 10,000ha of woodland to deliver capital growth and “enable the sequestration of carbon and generation of carbon credits,” the firm has said in its statements about the vehicle.
LPs will partly receive distributions in the form of carbon credits, which they can sell to generate revenue or retain for insetting. Carbon offsetting involves investing in or acquiring credits derived from carbon reduction activity that may occur outside a company’s direct or indirect operations, while insetting refers specifically to reductions that are directly related to a company’s operations either by geography, production or commodity.
The fund will seek to deliver a net IRR of 6 percent across its 20-year term, with distributions starting in 2026, according to a marketing document seen by Agri Investor. The 6 percent IRR figure relates only to “pure forestry returns,” a Gresham House spokesperson clarified, while “any carbon credit will be in excess of this return target, creating upside potential.”
Gresham House forestry managing director Olly Hughes commented: “This latest successful close is a testament to continued investor demand for strategies that can deliver genuine diversification and to Gresham House’s long-established expertise in the forestry sector.
“The asset class has the potential to provide compelling uncorrelated returns and significant impacts in terms of boosting biodiversity and making a meaningful contribution to carbon sequestration.”
Agri Investor revealed in March that the firm would launch up to four new timber funds in 2021, one of which is the UK-focused Forest Growth and Sustainability Fund. The remaining three vehicles would make up the GP’s international strategy, managing director Olly Hughes told Agri Investor, including an Australasia Forest Fund to pursue commercial forestry opportunities in the region.
Gresham House was confirmed as the manager for AXA IM Alt’s new 24,000ha timberland property in Australia at the end of July, which AXA acquired for more an A$700 million ($514 million; €433 million) from funds managed by Global Forest Partners.
Gresham House has previously suggested it would launch the second iteration of its Forest Carbon Fund this year, which will target jurisdictions with compliance emissions trading systems, such as New Zealand and California.
The fourth fund the firm had set its eyes on was a Europe Forestry Fund, which would focus on opportunities in Northern Europe.
Forestry investment director David Gardner, who joined Gresham House in June 2020 from US timberland investment firm Global Forest Partners, is leading the firm’s international strategy.