Institutional Investment in Forestry and Water Security

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1 Institutional Investment in Forestry and Water Security Radha Kuppalli Director, Investor Services New Forests Pty Ltd Katoomba XVIII: Forests, Water, and People Beijing, 16 May 2013

2 Important Note New Forests This presentation is the property of New Forests, and this material may not be reproduced or used in any form or medium without express written permission. The information contained in this presentation is of a general nature and is intended for discussion purposes only. The information does not constitute financial product advice or provide a recommendation to enter into any investment. This presentation has been prepared without taking account of any person s objectives, financial situation or needs. This is not an offer to buy or sell, nor a solicitation of an offer to buy or sell any security or other financial instrument. Past performance is not a guide to future performance. Past performance is not a reliable indicator of future performance. You should consider obtaining independent professional advice before making any financial decisions. The terms set forth herein are based on information obtained from sources that New Forests believes to be reliable, but New Forests makes no representations as to, and accepts no responsibility or liability for, the accuracy, reliability or completeness of the information. Except insofar as liability under any statute cannot be excluded, New Forests, including all companies within the New Forests group, and all directors, employees and consultants, do not accept any liability for any loss or damage (whether direct, indirect, consequential or otherwise) arising from the use of this presentation. The information contained in this publication may include financial and business projections that are based on a large number of assumptions, any of which could prove to be significantly incorrect. New Forests notes that all projections, valuations, and statistical analyses are subjective illustrations based on one or more among many alternative methodologies that may produce different results. Projections, valuations, and statistical analyses included herein should not be viewed as facts, predictions or the only possible outcome. Before considering any investment, potential investors should conduct such enquiries and investigations as the investor deems necessary and consult with its own legal, accounting and tax advisors in order to make an independent determination of the suitability, risk and merits of any investment. New Forests Advisory Pty Limited (ACN ) is the holder of AFSL No New Forests Asset Management Pty Limited (ACN ) is registered with the Australian Securities and Investments Commission and is an Authorised Representative of New Forests Advisory Pty Limited (ACN , AFSL ). New Forests Inc. has filed as an exempt reporting adviser with the Securities and Exchange Commission. Slide 2

3 Overview of New Forests Currently managing $1.3 billion in forestry assets in the Asia-Pacific region Head office in Sydney; 34 employees in Australia, New Zealand, Singapore, and San Francisco Managing 400,000 hectares of land and forestry assets across the Asia-Pacific region and United States New Forests is differentiated by forwardlooking investment strategies, emphasis on market research, and leadership in sustainable forest management We operate a Social & Environmental Management System that includes guidance on forest certification requirements and emphasizes continual improvement in social and environmental management Slide 3

4 Million Acres Institutional Investment in Forestry Institutional capital financing from long-term investors such as pension funds and insurance companies is an enormous pool of capital with ability to create significant positive impacts. Institutional capital in timberland is growing with room to grow and increasing international and emerging markets focus 16 Institutional Timberland Investment by Area Timberland Investible Universe $Bn* - Approximately $160 billion U.S. Area Global Area South Africa $3 SE Asia $5 Canada $7 8 Australia $7 6 New Zealand $ Other Latin America $20 Brazil $35 United States $75 *Source: HNRG and New Forests estimates, does not include Europe Slide 4

5 Australia Using Scale to Advantage Our Australian estate of 375,000 hectares provides opportunities to contribute to landscape-level water management outcomes In SW Australia, eucalyptus plantations have been credited with reducing salinity problems in catchments Forest owners/managers are key stakeholders in Australian water policy forums Catchment Management Authority partnership lets us bring multiple properties into biolinks project, improving riparian corridors Landscape-level opportunities arising from scale and location. Yellow properties show New Forests Australian estate in relation to protected areas, reserves, and parks. Property-level management combining forestry, agriculture, and ecosystem services can deliver local and regional benefits Slide 5

6 Southeast Asia Timber Investment Supporting Improved Water Management Acacia mangium plantation in Malaysia, established in 1980s as state-led development initiative to address water catchment management through reestablishment of forest on degraded land Our gap assessment has indicated need for monitoring water provisions to local communities How does timber management support water services? Forest cover prevents erosion, supports ecosystem function Riparian corridors excluded from harvest High Conservation Value protected forest as core reserve Slide 6

7 US Mitigation Banking Supporting Wetland and Stream Conservation In the US, wetlands and stream banking are supported by no net loss policy and protection of navigable waters of the US Markets are underpinned by well established legislation (US Clean Water Act) Enables marketing of credits in units such as linear feet of streams and acres of wetlands Pineywoods Mitigation bank, in East Texas is the second largest wetlands and stream mitigation bank in the United States (19,000 acres), servicing oil and gas, highways and reservoir development. Mitigation Banking helps ensure that development of water infrastructure projects, such as reservoirs, does not damage sensitive wetland and stream areas but rather conserves them Mitigation Banking is now growing as an asset class with institutional investors placing assets into this as an alterative and real assets allocation. New Forests sees an industry consolidation taking place where professional investors are bringing capital to a maturing industry. Slide 7

8 How Can We Attract Institutional Capital Toward Water Security? We are beginning to see some interest from institutional investors in water-related investment Infrastructure Water utilities Water use efficiency Water rights trading (US, Australia) Mitigation banking (US) Investment in sustainable forestry and land assets supports delivery of water-related benefits to ecosystems and communities Attracting capital to water security involves understanding how various assets fit in an institutional portfolio Slide 8

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