London-headquartered advisory Willis Towers Watson has committed £30 million ($37.7 million; €33.5 million) of client capital to launch a fund focused on converting UK pastureland into timber plantations
Senior investment consultant Douglas Crawshaw told Agri Investor Willis Towers Watson worked directly with True North European Real Estate Partners, which will manage the vehicle, to establish the Forestry Carbon Sequestration Fund, in order to meet growing client demand for environmental, social and governance-focused investments.
True North is a London-headquartered real assets manager owned by its management that was established last year to focus on specialist strategies.
“For me to go into a one-to-one deal with Blackstone would be a lot harder, because they have things set up and quite rigid. Whereas here, True North are being a lot more flexible to work with us in terms of our beliefs, and of course they share those beliefs, or we would not have progressed anyway,” Crawshaw explained.
Plans call for capital from the Forestry Carbon Sequestration Fund to be used to acquire pastureland properties suitable for tree planting of 200 acres or more anywhere within the UK. Crawshaw said transactions will likely focus on the northern regions of the UK, where declining beef production has weighed on prices for farmland well-suited for conversion.
Willis Towers Watson’s commitment to True North’s fund drew from an unnamed co-mingled vehicle. Crawshaw declined to identify it beyond saying it is predominately backed by pension funds and endowments from the EU and the UK.
Crawshaw declined to disclose a return target for the fund, which is designed to exist for up to seven years with the potential for extensions. Returns are to be derived, he said, from increases to the value of the land and sale of resulting timber for construction and furniture production.
He added that although the opportunity to invest in the Forestry Carbon Sequestration Fund was offered across Willis Towers Watson’s entire client base of corporate pension schemes, endowments, insurance companies and family offices, most found the fund’s size to be too small.
“We’ve set up a fund that is manageable in terms of scale, so that we can actually go out and find land in the right locations,” he said, adding the fund could be opened to other investors or accept more Willis Towers Watson client capital as necessary. “We can choose those land areas rather than be a price taker, which we would be if we were huge.”
Crawshaw said the UK’s drive to reach net zero carbon emissions by 2050 is one of several key policy developments that have helped bring increased investor attention towards timber.
An April report from London-headquartered real estate services provider Savills highlighted the UK’s introduction of a Woodland Carbon Guarantee aiming to create a timberland-focused carbon offset marketplace as one of several factors enticing new investors into the local forestry market.
“While we expect private markets to leverage from this, much work is still required at the policy level to fix the operation of carbon credits, preferably to a global standard,” wrote Savills analysts.