New Mexico Education Retirement Board has invested $20 million in Conservation Forestry Capital’s fourth fund.
The allocation brings its total commitments to Conservation Forestry Capital to $45 million, the board’s senior portfolio manager Mark Canavan told Agri Investor.
Conservation Forestry makes equity investments in working forests, drawing returns from conservation easements and other sustainability incentives alongside operations.
Its Conservation Forestry Capital IV has raised $221 million toward a $250 million target, according to a June Securities and Exchange Commission filing. The figure does not appear to include the NMERB commitment, as the filing shows an increase of only $1 million in commitments since the fund was launched in July 2015 on $220 million.
The commitment was approved by NMERB’s investment committee on 23 June. The public pension previously invested $20 million in the firm’s second fund.
Conservation easements and mitigation banking offer attractive revenue streams for investors who want to invest in land without exposing themselves to the risk that accompanies development, said Canavan.
“If you don’t want the risk exposure related with the development component of a property’s terminal value, and somebody might someday want to build condos on that property, you can sell off that potential future development value to a conservation group or public sector entity that wants to ensure the land remains undeveloped,” he said.
Canavan has said that he expects to see strong growth in mitigation banking and the availability of conservation easements. The government’s launch of the Natural Resources Investment Center in December 2015 signalled continuing public sector commitment and is incentivising private investment in mitigation banking, he said.
“We know that there’s significant focus on building out investment capability in the US [conservation sector]. On top of that you have a growing movement toward ESG investment philosophy more generally,“ he said, adding that NMERB itself does not have a mandate for ESG investments.
KKR’s recent investment in Resource Environmental Solutions, said Canavan, is indicative of the momentum of the mitigation banking sector.
“I don’t know how much velocity we have in the next 12 to 24 months, but the fact that KKR has decided to jump in the pool [is] indicative to me that this idea has taken hold.”
NMERB invests on behalf of active and retired members from New Mexico school districts, higher education and educational agencies.It has a diverse portfolio primarily investing in funds that use buyout and distressed strategies. The board has $11.5 billion in assets under management according to PEI Research & Analytics.