BNP Paribas Asset Management is expanding its private markets and sustainability offering through the acquisition of a Danish natural resources specialist which oversees more than €5.5bn of woodland investments.
In a statement on 8 December the French-headquartered investment house said it had bought for an undisclosed sum a majority stake in International Woodland Company, which specialises in woodland and agricultural investments.
"Private finance clearly has a role to play in addressing the challenges of increasing and protecting natural capital, as well as appealing to institutional investors looking to diversify into uncorrelated assets that can offer an inflation hedge and enhanced risk-adjusted returns,"
Through this purchase, BNP Paribas will for the first time offer its clients direct investment in woodland and agricultural land.
Forestry, agriculture, and related natural capital strategies have attractive risk-return profiles and are important aspects of mitigating climate change and achieving net zero, it further said.
Forestry, for example, offers appealing investment returns and inflation protection, as well as the potential for carbon capture and conservation projects. Almost all climate scenarios rely on Negative Emission Technologies (‘NETs'), particularly forestry and other land use changes, to reach net zero emissions and limit global warming to 1.5-2°C in order to cover biogenic emissions and emissions from hard-to-abate sectors.
Beyond this, forestry provides many benefits, including biodiversity preservation and water management, and as the World Resource Institute noted in its recent Not Just Carbon report, the global climate system cannot function without healthy forests.
BNP Paribas said as an investment market, natural capital is still relatively small, with institutional timberland estimated to be less than USD 100 billion, which equates to about 0.1% of global GDP.
This compares to estimated global government expenditure of around USD 500 billion annually on activities that can be harmful to biodiversity. Nonetheless the natural capital market is evolving rapidly, encouraged by initiatives from the United Nations and other supranational agencies, and expected to be accompanied by the continued development of associated investment and growing client awareness.
Private finance clearly has a role to play in addressing the challenges of increasing and protecting natural capital, as well as appealing to institutional investors looking to diversify into uncorrelated assets that can offer an inflation hedge and enhanced risk-adjusted returns. It additionally meets the impact investing requirements of those looking for sustainable investment strategies that can deliver tangible environmental and social impact, and contribute to the UN Sustainable Development Goals.
Otto Reventlow, CEO of IWC, said: "We welcome BNP Paribas Asset Management's investment in IWC and look forward to partnering with them to grow the nature-based solutions universe together. Both companies share a vision of combining fiduciary duty and active contribution to the transition to a sustainable world. We believe that wood is the preferred material in a carbon-neutral world, and agricultural production is on an important path to deliver sustainable proteins to the global citizen. This partnership will enable IWC to expand its distribution reach and further its resources on sustainability and the EU taxonomy to the benefit of both our current and future clients."
David Vaillant, BNPP AM executive committee member, said: "Our investment in IWC is fully aligned with our commitment to be a leading sustainable asset manager, be forward looking on sustainability-related topics with our clients and increase our focus on sustainable investment strategies, especially within private markets. It is a key component of our Net Zero and Biodiversity roadmaps, as well as being aligned with broader BNP Paribas Group initiatives to protect and restore forests and biodiversity, such as Zero Net Deforestation or Act4nature.
"We are seeing growing interest from our clients for investing in forestry as an asset class, and via IWC we are very pleased to be able to offer them an enhanced range of sustainable solutions that complement our existing private markets capabilities and contribute to reducing the net zero financing gap while enabling a just transition for nature."
