New Forests partners with 3 DFIs to launch $500m Africa forestry fund

New Forests is partnering with CDC Group, Finnfund and Norfund to launch the strategy, its first major foray into the African market.

New Forests has partnered with a trio of European investors to launch an investment fund focused on the sustainable forestry sector in sub-Saharan Africa.

The Sydney-headquartered asset manager is aiming to raise up to $500 million over the next three to five years, in partnership with: CDC Group, the UK’s development finance institution; Finnfund, the Finnish Fund for Industrial Cooperation; and Norfund, the Norwegian government’s investment fund for developing countries.

New Forests CEO David Brand told Agri Investor that the move would add a fourth market to the portfolio, building on its existing strategies in Australia and New Zealand, the United States, and emerging markets in Southeast Asia.

“Prior to covid-19, we were in discussion about the opportunity in Africa. The history of forestry in Africa has really been people funding small plantation development companies, and they wouldn’t get to the required scale or struggle with the amount of time it took for trees to mature,” he said.

“We want to get something operating at a scale where we can be profitable and integrate the smaller plantation companies with processing and infrastructure so that it [will] be efficient and start to build a domestic plantation forestry sector.”

The structure of the investment vehicle is still yet to be finalized, with more details to be revealed in early 2022.

“Ultimately, we want to be able to attract institutional capital and impact investment capital into this vehicle, but often it’s the DFIs who can create that initial catalytic [investment], building a track record so that other investors can come in alongside.”

Brand said that New Forests has already identified a target first asset and will establish a local team in Nairobi, Kenya, to manage assets acquired by the fund. That team will be headed by director Paul Ohaga, who was appointed in June 2021.

On the effect of COP26 on the attractiveness of climate change-related investment strategies, Brand said: “I think everybody is looking for solutions, actual working models of how we can create the operating concept of natural climate solutions.

“There are three elements to that: one is conserving what nature we have left; two is restoring degraded land; and three is moving forestry and agricultural production systems to become carbon neutral or carbon positive. We see core commercial forestry as a perpetual system [for conservation and regeneration].”

In a statement, CDC Group CEO Nick O’Donohoe said: “We believe that responsible investment in sustainable forestry will preserve Africa’s rich natural environment and is a key step toward addressing the climate emergency, while bringing prosperity and green jobs to rural communities. As each COP conference demonstrates, co-operation is at the heart of climate action. We’ve already assembled a wealth of expertise to work together and as we develop the partnership, we will be looking to invite other like-minded leaders in the sector to join us.”