DECEMBER 2020

Uncorrelated, sustainable growth

FORESTRY

Why invest in forestry?

Foresight is a leading independent infrastructure and private equity investment

manager which has been managing investment funds on behalf of institutions and retail clients for more than 35 years. Foresight manages over £6.5 billion of assets, 70% of which is invested in a portfolio of over 240 sustainable infrastructure assets globally.

Sustainability lies at the heart of our business. We believe

that investing responsibly to make a positive social and

environmental impact is critical to long-term success.

Forestry is a sustainable real asset that both diversifies

an investment portfolio and provides access to attractive

returns with strong capital preservation characteristics,

whilst removing and storing CO2 from the atmosphere and

improving ecosystems.

Increasing demand for sustainable building, packaging and construction materials

Global macroeconomic trends indicate both a steady increase

in population and consumption in the medium to long term,

and a growing preference for more sustainable building,

packaging and construction materials. These megatrends

support a sustainable increase in demand for timber and wood

products. However, the global supply of timber is finite. The

ability to upscale timber production is limited by the lack of

available mature woodland, regulatory restrictions on levels

of felling and the biological cycle of tree growth. Within

this supply and demand dynamic, investment in forestry is

increasingly attractive.

Capital preservation and long-term revenue streams

Forestry assets that are mature and yielding provide

both capital preservation and long-term revenue streams.

Afforestation projects have similar characteristics to mature

forestry, and simultaneously remove and store CO2 from the

atmosphere and improve ecosystems, providing a sustainable

and attractive risk-adjusted return.

Market flexibility

A core advantage of forestry harvesting is that there is

no obligation to fell and sell timber if prices were to drop

in a particular year. The timber can be left to continue to

grow, awaiting a more attractive moment of sale. Revenue

enhancements could also be achieved through land-use

diversification (e.g. eco-tourism and potential carbon trading),

offering increased and more stable returns.

Positive environmental and social impact

Foresight’s experience in land acquisition and valuation, as

well as active asset management, will help in identifying

and extracting value from forestry assets. Foresight is well

positioned to identify assets with strong environmental and

social attributes. We will be managing the assets in line with

Forest Stewardship Council (“FSC”) and Programme for the

Endorsement of Forest Certification (“PEFC”) standards.

Sector overview

Investment characteristics

• Attractive risk-adjusted return resulting from favourable macroeconomic factors driving the demand and price of wood and timber products.

• Capital preservation due to resilient land value underlying forestry holdings, coupled with inflation protection.

• Yielding asset in line with timber harvesting cycles.

• Differentiated strategy independent of market cycles that offers diversification benefits at a portfolio level.

• Sustainability credentials due to renewable nature of timber when sustainably managed, as well as carbon sequestration throughout the biological life of the trees.

Goal 3 Good Health and Well-Being Ensure healthy lives and promote well-being for all at all ages.

Foresight Contribution: Reducing pollution through the absorption and sequestration of emitted Green House Gas by the sustainable management of existing forestry projects and the afforestation of baron, low-grade land.

Goal 6 Clean Water and Sanitation Ensure availability and sustainable management of water and sanitation for all.

Foresight Contribution: Committing to the responsible management of water-resource through the protection, management and restoration of forests and peatland.

Goal 12 Responsible Consumption and Production Ensure sustainable consumption and production patterns

Foresight Contribution: Demonstrating commitment to the 2015 Paris Agreement and contributing to the globally supported decarbonisation agenda by sequestration of CO2 through the sustainable management of forestry and afforestation activities.

Goal 13 Climate Action Take urgent action to combat climate change and its impacts

Foresight Contribution: Demonstrating commitment to the 2015 Paris Agreement and contributing to the globally supported decarbonisation agenda by sequestration of CO2 through the sustainable management of forestry and afforestation activities.

Goal 15

Life on Land Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss.

Foresight Contribution: Preserving integrity of land through the preservation of natural environments, sustainable management practices and the introduction of environmental initiatives through active asset management, supporting biodiversity and the ecosystem.

Forestry truly is a green asset class, and directly contributes to the United Nations Sustainable Development Goals (“SDGs”). A focus on sustainable asset management is necessary to ensure realisation of these opportunities and is integral to the Foresight forestry approach. Sustainable forest management aims to meet the needs of the present without compromising the ability of future generations to meet their own needs. Certification with the Forest Stewardship Council (“FSC”) or the Programme for the Endorsement of Forest Certification (“PEFC”) provide industry standard best practice standards in the sustainability space which Foresight follows, as well as third party validation of compliance.

ESG and sustainability characteristics

What Foresight is investing in

Foresight has invested in a number of forestry holdings, including mature forestry and new afforestation projects. Foresight also has a strong pipeline of future deployment opportunities. Generally, investment sizes will be between £2 million and £10 million, for forestry holdings in the region of c. 100 hectares at a minimum.

Key investment criteria

This document has been approved as a financial promotion for the purposes of section 21 of the Financial Services and Markets Act 2000 (FSMA) by Foresight Group LLP, which is authorized and regulated by the Financial Conduct Authority (FCA) (ref 198020). Foresight’s registered office is at The Shard, 32 London Bridge Street, London SE1 9SG.

Appropriate climate to facilitate forest growth;

Established forestry sector and industry;

Available and reliable data on forestry characteristics;

Stability of political situation;

Robust legal and forestry-specific governance;

Tax incentives or re-planting grants;

Amenable regulatory environment;

Limited illegal felling risk;

Strong history of key environmental and sustainability practices.

Contact us

+44 (0)203 667 8199 sales@foresightgroup.eu

Foresight Group LLP, The Shard, 32 London Bridge Street, London SE1 9SG

foresightgroup.eu

Key risks

Investments in natural resources are, by their

nature, illiquid and difficult to value. They are

therefore considered to be higher risk than

other forms of investment and not suitable for

all investors. They are, however, uncorrelated

to stock markets and in a diversified portfolio,

can protect against inflation. The value of

income generated from investment in forestry

may go down as well as up and there is no

guarantee that investors will get back their

invested capital or forecasted returns. Capital

is at risk. Prospective investors should regard

it as a long-term investment. If the investment

is part of a tax relief product, such tax reliefs

are dependent upon an investor’s individual

circumstances and are subject to change.