Carbon offsets being chased by asset managers

Friday 1 Oct 2021

 
Asset managers that own forests logged for timber are expecting a jump in returns through a boom in the sale of units linked to the carbon stored in trees that are used to meet climate change targets.

Managers including Manulife, Gresham House and JPMorgan are among those that have moved this year to launch or grow a business around forestry offsets that are being sought after by organisations looking to compensate for their greenhouse gas emissions. An offset is supposed to represent a tonne of carbon that has been permanently avoided or removed from the atmosphere.

Olly Hughes, managing director of forestry at specialist asset manager Gresham House, said the sale of carbon offsets could add about 1 per cent to net nominal returns from managed forests, which was “significant”. This income would provide an interim revenue stream while young trees were growing, he added.

JPMorgan Asset Management bought forest investment company Campbell Global in June for an undisclosed sum in a bid to “become an active participant in carbon offset markets”. The Portland-based Campbell had $5.3bn in assets and about 700,000 hectares under management.

Demand could push offset prices to $20-$50 per tonne of carbon by 2030, according to forecasts from specialist data group Trove Research, compared with less than $5 that many command today. Several investment managers said the interest in carbon offset projects was driving up land prices in countries including the UK and New Zealand.

“This whole climate finance area is creating an evolution in the forestry asset class,” said David Brand, founder of forestry investment manager New Forests, based in Sydney. The sale of offsets generated by certain of its US forests could add 200-400 basis points to the returns from timber, he said.

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Source: FT, californiannewstimes

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