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New Forests considering ‘natural capital platform’ following Mitsui-Nomura investment

'We certainly think that there is an opportunity to have a natural capital platform around carbon and biodiversity,' New Forests managing director Radha Kuppalli said.

Sydney-headquartered asset manager New Forests will use investment from Mitsui and Nomura to “deepen and accelerate” its existing strategies, including the potential launch of a new natural capital platform.

Speaking to Agri Investor following the announcement in May of the firm’s acquisition by Japanese conglomerate Mitsui & Co and financial services group Nomura, New Forests managing director, impact and advocacy, Radha Kuppalli, said the firm would like to have a “truly global platform” and that the investments will “enable further internationalization.”

“We certainly think that there is an opportunity to have a natural capital platform around carbon and biodiversity, so we’re working through our business strategy for that, building upon all the experience we already have,” she said.

Kuppalli referred to New Forests’ experience with its Forest Carbon Partners vehicle in the US – which managed assets alongside indigenous people and family forest owners to deliver a high-volume supply of carbon offsets to businesses regulated under the California cap-and-trade system – as an example of what investments under such a platform could look like.

“It’s really cracking that nut about how we develop natural capital assets – maybe initially carbon but thinking about biodiversity down the line. How do we aggregate supply and work with farmers, indigenous communities, First Nations, building it out in the US and looking if there is further opportunity in Asia, Africa and elsewhere in North America?

“Carbon will be integrated into our forestry strategies, optimizing landscapes for timber and carbon, but there’s also an opportunity to develop carbon and biodiversity assets in partnership with a variety of landholders. Those are the strategies we’re thinking about with that kind of natural capital platform,” she said.

Rigorous process

Kuppalli said New Forests decided in 2020 to consider a new strategic partnership that would help it achieve its aim of doubling its AUM twice by 2030.

“Over the last eight or nine months we ran quite a rigorous process, talking to the biggest asset managers in the world. For Mitsui, they came into the business in 2016 and were also keen to be part of the process by increasing their shareholding.

“They are thinking about how to transition their business, aligned with net-zero and the sustainability transition [and it was similar] for Nomura. The whole Japanese institutional investment market is looking at transitioning towards more private assets and alternative assets that are able to offer more sustainability-linked products. Ultimately, we have good alignment on vision, large access to distribution capacity with pools of capital in the Japanese market, and an overall desire to grow the business.”

Both investors valued New Forests’ belief in the role that forestry and land use can play in the transition to net-zero emissions, Kuppalli said.

“The Japanese government has also made a very public commitment to transition [the country] to net-zero – and once the government takes that kind of position, the major companies and investors take note and start to execute on what their strategies will be to contribute to the transition. That was certainly part of the investment thesis as well. They know New Forests is a platform to build climate mitigation.”

The two Japanese investors will together hold a majority stake in the Sydney-headquartered asset manager, with Mitsui increasing its shareholding from its current level of approximately 23 percent to 49 percent and Nomura controlling a 41 percent stake. New Forests staff will retain the remaining 10 percent.

As part of the deal, New Forests CEO and chairman David Brand will continue with the business that he founded in 2005 until June 30, 2025, focusing on strategic initiatives and growth opportunities.

Separately, earlier in June New Forests announced it had purchased a 108,000 ha forestry estate in northern California from The Michigan-California Timber Company on behalf of unidentified institutional investors.

The firm has already been expanding its footprint outside the US, partnering with a trio of European investors in 2020 to launch an investment fund focused on sustainable forestry in sub-Saharan Africa for the first time.

This added to its two Tropical Asia Forest Funds focused on Southeast Asia and the three vehicles in its Australia New Zealand Forest Fund series, the latest of which, ANZFF3, closed on A$873 million in 2018.