Nest has set up a timberland fund, which will invest directly into sustainable forestry practices.
The master trust has appointed Campbell Global, JP Morgan Asset Management’s timberland investment advisory company, to provide the scheme with a global portfolio of direct investments in this area.
Nest says that over the past 30 years (covering the period from 1992 to 2020) timberland outperformed US and non-US fixed income and non-US equities. It adds that on a risk-adjusted return basis, timberland outperformed US equities.
Nest adds that timberland also delivers a stable return was a cash yield, is a natural inflation hedge and also offers additional portfolio diversification.
Nest says that as well as delivering returns for investors, this asset class can play an important part in a scheme’s overall ESG investment strategy, particularly in relation to reducing carbon emissions, The mandate given to Campbell Global is for investment that focus on the responsible management of forest resources, preserving biodiversity, and maintaining ecosystems.
Nest says well-managed forests can provide critical ecosystem services such as carbon capture, water filtration, soil preservation, and habitat for wildlife, enhancing the overall environmental value of the investment. Timberland investments also provide a renewable resource for a growing economy, from supplying construction materials to biodegradable packaging.
Campbel Global will seek out opportunities for Nest in key global markets including the US, Australia, New Zealand and Chile.
The appointment of Campbell Global follows a competitive procurement process in which 12 fund managers applied to offer Nest access to sustainably managed timberland.
Nest’s head of private market Stephen O’Neill says: “Campbell Global is one of the largest and longest established timberland investment advisory organisations. We were particularly impressed by the sophistication of their operations, responsible investment philosophies, and ability to work at scale to minimise operating costs while maximising integrated asset management.
“We believe the importance of preserving natural capital will only increase in the coming years. Many aspects of our ecosystem such as forestry, water and agriculture are closely linked to climate change mitigation and adaptation. Achieving net zero emissions by 2050 will require natural capital preservation.”
Campbell Global CEO and chairman John Gilleland adds: “We are delighted to be partnering with Nest to implement their core timberland portfolio strategy, leveraging Campbell Global’s decades of expertise in forestland investment advisory and services for the benefit of Nest’s members.
Timberland offers Nest’s members the opportunity to combine investment and sustainability goals, which include enhanced portfolio diversification, a hedge against inflation, carbon removal to help mitigate climate change, and the preservation of biodiversity.”