Forestry and environmental markets fund manager New Forests reported a successful capital raising of a fund focusing on plantation assets in the Asia Pacific Region and progress on UN PRI commitments in its second sustainability report.
New Forests, a privately held company, stated assets under management of AU$1.25bn and almost 400,000 hectares of land and forestry assets across six Australian states. New Forests has three investment strategies – Australia New Zealand Forest Fund, which has invested 90% of its AU$490m of committed capital within 18 months of inception and generated above-benchmark returns. The fund did not specify the rate of return or the benchmark. New Forests also reported the first close of the Tropical Asia Forest Fund (TAFF), which will invest in plantation forestry assets in the tropical Asia Pacific region. TAFF achieved a first close of US$100m in commitments and will be managed by the company’s Singapore office. New Forest also launched its third investment strategy, Forest Carbon Partners, which is an investment vehicle to finance forest carbon offset projects for California’s cap and trade market.
New Forests became a UN PRI signatory in 2010 and organises its responsible investment strategy around the PRI’s six principles. New Forests participated in UN PRI’s assessment process in 2011and had a top quartile ranking for the second principle, relating to active ownership and integration of ESG into investment decisions. The company also reported ranking in the third quartile for performance against principles covering appropriate disclosure in entities in which the company invests, working together to enhance effectiveness in implementing the principles, and reporting on activities and progress towards implementing PRI. New Forests also disclosed that it performs in the fourth – bottom – quartile on reporting on activities in comparison to other Australian investment managers.
New Forests also maintains internal sustainability systems – the New Forests Social and Environmental Management System (SEMS) as well as commitments to sustainability reporting. The company’s SEMS is “framed around approaches established in the ISO 14001 series,” and is designed to identify, manage and report on social and environmental aspects and potential impacts of New Forests’ investments, the company said. As part of this strategy, New Forests audits its fund vehicles annually, and audits are reviewed by the company’s risk and compliance committee.
“Over FY2011-12, two funds – New Forests Australia New Zealand Forest Fund and Forest Carbon Partners – went through a complete annual auditing cycle of the SEMS,” the company said in the report. “Annual audits for ANZFF and Forest Carbon Partners were conducted in May and June and finalized and reviewed by the Risk and Compliance Committee in July 2012. While the reviews identified some weaknesses and areas for improvement, no corrective actions were identified and both funds are in compliance with relevant policies.”
In the 2012-2013 financial year, New Forest said it would conduct a review and update of SEMS as part of its continual improvement cycle, including updating asset class guidance to potentially include management standard guidance, and allowing demonstration and monitoring of “sustainability and stewardship activities not captured by current process.”
New Forests also identified environmental and social risk factors as part of their strategy, including climate change and the increased likelihood of damaging, catastrophic weather events, “[g]rowing demand for palm oil, soy, beef, and other agri-commodities creates increasing pressure for land, which can impact timberland highest and best use (HBU) value and rural land markets ,” and “[c]oncerns about land grabbing and agricultural production create a highly sensitive environment for international investors and may add regulatory and political uncertainty to investment programs.”
“New Forests’ business is at the forefront of addressing some the world’s most pressing social and environmental issues, including climate change, loss of biodiversity and other ecosystem services, and growing global demand for commodities and primary materials,” the company said. “We seek not only to mitigate these risks through our investment strategies, but also to view them as opportunities to promote a shift toward sustainable investment that balances economic, environmental, and social pressures on the land, and in particular forests. Because the mitigation of these risks requires innovation and significant expertise, New Forests views our experience in developing and executing investment strategies that focus on these key themes to be a competitive advantage.”
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