Evli Impact Forest Fund I raised a total of EUR 94 million in capital before its final closing in April 2022.
Evli Impact Forest Fund I offered institutional investors and high net worth individuals the opportunity to invest in the world's leading forest funds globally. The successful closing allows the fund to construct its investment portfolio as planned.
"Interest in forestry as an asset class has grown, as forests are seen as a solution for lowering the carbon footprint and reducing the effects of climate change. Investing in forestry offers investors the opportunity to move to an investment portfolio that is carbon neutral and supports sustainable development," says Roger Naylor, Portfolio Manager of the fund.
The fund invests in forest funds internationally
Evli Impact Forest Fund I operates a fund of funds strategy, investing across a range of large scale international forest funds. By the end of 2022, the fund's investment portfolio will have expanded to include six to seven forestry funds. To date, a total of three fund investments have been made in the US and South America.
Investments are made globally, as international forestry fund investments have a higher expected return. Forest growth is faster in South America and the USA compared to the Nordic countries. Historically, this has also meant a much higher return for the forest. In the US, for example, forestry assets have offered a long-term return of over 8% per annum. A faster forest growth rate also means up to five times more opportunity to reduce the carbon footprint.
"The fund's investment strategy includes sustainable forest management and the planting of new forests. The fund can also participate in carbon markets. The combination of strategies allows both cash flow and capital appreciation to accrue to the fund's investment portfolio," says Naylor.
Forestry offers an opportunity to reduce the carbon footprint of your portfolio
The low correlation of forestry investments relative to other asset classes has traditionally attracted institutional investors, as forestry provides an efficient diversification effect in the portfolio. In addition, studies have shown that forestry provides a good hedge against inflation and that its performance is very resilient to cyclical fluctuations.
"Carbon neutrality goals have become a major priority for many companies. This has given a new impetus to forestry investment, and interest in forestry has grown among institutional investors worldwide," Naylor says.
"Recently, new types of investors have also become interested in forestry. They are interested in the strong social and environmental impacts of forests, such as their role as carbon sinks, and in biodiversity and rural employment," says Naylor.
One reason why Evli has set up its forest fund now is the new regulations on reporting and measuring carbon dioxide emissions that are expected in 2023. The background to these is the so-called 'Ambition Mechanism' of the 2015 Paris climate agreement, which aims to periodically tighten countries' emission reductions and monitor the achievement of the agreement's targets. Naylor believes this will increase interest in investments that reduce the carbon footprint of investment portfolios.
Forestry as a natural climate solution
Climate change has been widely recognised in recent years as one of the biggest challenges facing society. Reducing carbon dioxide in the atmosphere is essential to meeting the Paris agreement's targets of limiting global warming to 1.5 degrees Celsius. Forests are the only scalable and affordable way to achieve this.
"In an era of climate change, the forest fund offers a rare opportunity to do good and enjoy attractive returns at the same time. Forests are a 'natural climate solution'," says Naylor, whose experience in forestry investments amounts to over 18 years and more than €3.7 billion.
The development and management of alternative investment funds is a key part of Evli's strategy, and their combined client assets already exceed EUR 1.6 billion (31.12.2021). The funds are aimed at professional investors and a limited number of non-professional clients who are considered to have a sufficient understanding of the funds and their investment activities, and who wish to diversify their investments outside of the traditional asset classes.
For more information:
Roger Naylor, Evli Fund Management Company Ltd, Portfolio Manager, private equity funds, tel: +358 50 356 8602, email@example.com