New Forests: ‘Investors have to take climate risk seriously’

Forestry asset manager New Forests has published its inaugural Climate Disclosure Report, saying that the “writing is on the wall” for investors when it comes to the risk posed by climate change.

The report documents the firm’s application of recommendations from the Task Force for Climate-Related Financial Disclosures (TFCD), a voluntary organization that aims to develop consistent climate-related financial risk disclosures for companies to provide information to investors, lenders, insurers and other stakeholders.

New Forests director of sustainability and communications Mary Kate Bullen told Agri Investor the asset manager felt it was important to engage with the TFCD and make disclosures.

“We believe the writing is on the wall when it comes to climate risk – investors have to take it seriously,” she said. “TFCD has emerged as the leading framework for climate disclosure and includes a useful framework to consistently think about governance, strategy and complex issues like climate scenario analysis and transition pathways.”

New Forests split climate risks into two buckets: transition risks, which it sees as centered around changing climate policy such as forestry practices and climate impact liability; and physical risks such as extreme weather events, fires, rising sea levels and long-term changes to rainfall patterns.

The risks also present opportunities, the firm said, with the potential for emissions-intensive forestry supply chains to restructure or adapt, while forestry assets exposed to carbon prices or increased demand for low or zero-carbon investments could benefit.

Establishing targets

The report set out a series of climate metrics, such as carbon sequestration and storage, and a three-pronged climate action plan that will see New Forests set emissions reduction targets for its business in 2021. It also lays out the development of “science-based targets” for its forestry investment portfolio by 2022.

These are likely to include targets that aim to increase total carbon stored in its forestry assets, among others.

When asked whether New Forests would consider making asset or fund-level targets public, Bullen said: “There are several steps yet to come as we work toward a science-based target for the investment portfolio and this will certainly involve specific fund-level targets and actions. It’s quite likely the fund targets will be public, but that detailed information asset by asset is unlikely.

“There is a lot of information to be managed and concise disclosures at the asset level are difficult to understand and interpret without the full context of strategic asset plans and the long-term objectives for each investment. A lot of that information involves commercially sensitive data and strategy, and so we must be mindful of our fiduciary duty.

“At the same time, we want to be transparent and clear in the steps we take on climate action and be clear that we will not ‘cherry pick’ in disclosures.”

The firm would welcome collaboration with clients and other forestry investors on this, Bullen said.

She added that investors were “excited” to see a manager apply portfolio-level accounting for greenhouse gas emissions to forestry investments. As investors develop their own targets and approaches, the firms wants to be able to demonstrate to asset owners “how their forestry assets contribute to their own climate objectives,” she said.

Bullen said that New Forests acknowledged the “fresh energy” from other forestry investment managers, and asset managers generally, on climate change, but hoped the Climate Disclosure Report could contribute to further progress.

“As a business we don’t want to stand alone on forest climate solutions – if we do, then the forestry sector and all of us invested in it will miss out on critical climate opportunities. We hope our report sparks dialogue among our peers and the broader set of asset owners who may consider forestry part of their solutions for decarbonization and net zero.”

New Forests also wants metrics to become better at accounting for carbon removals in forestry and carbon storage in wood products.

“We want to build the evidence base and demand for sustainable forestry investment at a scale that it can flip the sector – which on the whole is a net emitter – to one that is generating net carbon removals, contributing to global climate neutrality. We want this evidence to demonstrate that these climate-positive forestry strategies are immediately investable and scalable,” Bullen said.

New Forests is headquartered in Sydney and has more than A$5.9 billion ($3.75 billion; €3.35 billion) in assets under management across a global portfolio of almost 1 million hectares of forestry and conservation assets.

CEO David Brand told Agri Investor last month that he believed climate change would become a “very significant driver” of the next wave of timber investment funds.