London-listed sustainable investment manager Foresight has announced it is branching out with an IPO of a new fund that will invest solely in UK forestry assets.
Incorporated only a week ago, Foresight Sustainable Forestry Company will list on London’s main market with a fundraising target of up to £200m, at a price of 100 pence per share.
It comes just seven months after Foresight Group, which had £7.8bn assets under management as of June, floated on the London Stock Exchange in a £227m IPO that valued it at around £455m.
In an announcement this morning, Foresight said the new fund would target sustainable impact through “predominantly investing in sustainably managed commercial forestry assets including afforestation assets.”
The group plans to funnel the proceeds from the IPO into new afforestation planting that it estimates will directly remove around 4m tonnes of carbon from the atmosphere.
Foresight said the company will target a net asset value total return of more than CPI inflation + 5 per cent a year on a rolling five-year basis once substantially invested.
“For some years now Foresight, as one of a very few significant players in this sector, has been looking to scale up its forestry investments in an appropriate structure for a wide range of investors to participate in,” said Foresight Group executive chairman and co-founder Bernard Fairman.
“We truly believe that this is very much a fund of its time.”
Foresight said it has had its eyes on the forestry sector as an investment target since 2016, and has invested in 11,700 hectares of UK forest and £130m of afforestation “seed assets” in the last couple of years through its inheritance tax fund, which saw an annual forestry deal flow of over £300m.
Investors that buy shares in the new fund will be investing alongside the Foresight Inheritance Tax Fund, which the group said will remain a cornerstone shareholder and account for up to 30 per cent of issued share capital.
Sitting on the board of the new company will be: Richard Davidson as chairman, who previously chaired Gresham House’s forestry investment committee; Josephine Bush, an ex-partner at EY specialising in renewables; Sarika Patel, an ex-partner at Zeus Capital; and Christopher Sutton, who was a director of James Latham until 2019, and chairs Timber Development UK (a merger between the Timber Federation and the Timber Research Development Association).
“Forestry provides a compelling investment opportunity, meeting investor requirements on climate, sustainability and ESG issues, inflation protection properties, and portfolio diversification,” said Richard Davidson, the fund’s new prospective chairman.
“Over the long term, managing a portfolio of forestry assets is generally low risk, driven by growth in both volume and value as the trees mature.”
“We expect the significant shortfall in timber in the UK to push up timber prices in the coming years.”