Global forestry investment manager New Forests – which counts $2.4 billion of assets under management across four funds in the US and Asia-Pacific – this week published its annual report on sustainability and responsible investment.
Knowing this is a topic of great interest to many readers, I caught up with New Forests’ chief executive David Brand to hear more about the report and why he thinks its publication is important for the wider industry.
Why do you publish an annual sustainability report?
As increasing numbers of investors look at real assets, they realise that there are significant environmental and social risks to the asset class. So managers that can make this comprehensible – by showing what the risks are, how you manage them and how you can generate higher returns by successfully managing these key issues – will differentiate themselves.
And to some degree, we are also trying to put it out as a peg in the ground for the rest of the sector as something we all need to deliver on. If you look at the future of the world, new bioeconomic ideas and the growth of Asian demand, the future is not going to come from logging in Siberia, but from the ability to manage an intensification in production and align that with key conservation objectives and community development.
We try to be as transparent as possible with this report because that’s part of the principles of sustainability: accountability and openness. And especially as our investment capital increases across a range of countries, there is a real need for us to communicate to communities that institutional investment is not a bad thing. We are stable, long term investors with a wide perspective and aware of the implications of our investment. Communicating this to a wider audience is part of that process.
What kind of progress have you made since last year in terms of sustainability? And what could you work on more?
After making some good progress in Australia in securing assets, we are now building up the business and so engaging a lot more with our increasing contractor base and trying to find win-win outcomes. For example, we can offer longer term contracts that allow contractors to raise bank finance to invest in the latest forestry machinery. These new technologies reduce operating costs and reduce the cost of production. That is a benefit to both our clients and to the contractors.
We have also done a lot of work around conservation management and partnerships with NGOs on biodiversity issues and community engagement. We could still do more there especially as in some regions of Australia, like the Green Triangle and Tasmania, we are the dominant landowner. So it’s important to reach out to community groups and political parties to get feedback from them on emerging issues on a continuous basis.
But overall, there is still a lot of opportunity in pure good management of the assets, building partnerships and community relations to reduce the risk of the investment and hopefully generate efficient infrastructure and jobs with it to help avoid any negative relationships.
What advice do you think other institutional investors can take from the report?
The main area that institutional investors need to think about is the communities they are impacting through their ownership. Lacking communication is often a big problem. A lot of the forests we now own were formerly owned by governments and domestic companies, so communities now don’t know who these people are that own the land they live near. So we need to explain our management objectives, listen to communities about what their aspirations are, and make sure the local communities know who to contact or complain to when there’s a problem. For example, I will go to dinner with 15 local farmers to enable them to talk directly to me and this helps them feel like they are being listened to and for us to be able to respond to them.