Woodlands and timber are a lucrative investment opportunity in the current climate.

Gresham House (AIM: GHE), a specialist alternative asset manager listed on the London Stock Exchange’s Alternative Investment Market (AIM), offers alternative investment solutions focusing on a sustainable future and ESG. The Gresham House Forest Growth & Sustainability Fund has raised this month an initial £127 million (US$175 million) and will generate returns from timber and carbon credits. (IPE Real Assets)

The value of trees

According to WhatInvestment, trees are the antidote to some of the Earth’s biggest environmental challenges. Unfortunately, industrialised farming and urbanisation have shrunk the world’s forests by 129m hectares during the past 25 years, an area equivalent to the size of South Africa, according to data from the UN FAO.

Furthermore, the amount of carbon stored by the world’s forests has fallen drastically, causing a huge spike in the CO2 content in the atmosphere.

The Gresham House Forest Growth & Sustainability Fund aims to deliver sustainable capital growth through the creation of new productive woodland. It also would enable exposure to existing income-generating forestry in the UK.

The fund’s income sources include sale of carbon credits from the creation of new woodland, sales of timber, and capital appreciation on its holdings of land and trees.

Oversubscription

The fund launched with a target of £100 million, but investor demand resulted in oversubscription. Investors included the Scottish National Investment Bank, a public-owned financial institution that will deliver infrastructure development and strategic investments to Scotland.

“In light of a strong deal pipeline and timely deployment, we anticipate a second close for the strategy later this year,” the firm said.

Olly Hughes, managing director of forestry at Gresham House, said the response for the fund indicated rising appetite for the forestry asset class from institutional and private client investors.

Eilidh Mactaggart, CEO, Scottish National Investment Bank, said that the new planting element and ability to generate carbon credits represented an innovative investment proposition that was not yet fully appreciated by mainstream investors.

Related Story:  Invesco Launches Four Active Non-Transparent ETFs Including Real Assets