Stafford Capital Partners secured $242 million in initial commitments from three UK local government pensions schemes (LGPS) for its Stafford Carbon Offset Opportunity Fund. The fund was launched in December 2022 with a $1 billion target.
The fund is an Article 9 impact fund under the European Sustainable Finance Disclosure Regulation (SFDR), investing in afforestation, natural forest restoration, and improved forest management projects. Most of Stafford's timberland allocations focus on North America, Australia, and New Zealand, but the investment firm is also looking for opportunities in Europe.
The Stafford Carbon Offset Opportunity Fund aims to invest in assets that meet the criteria for developing carbon projects. Stafford CEO, Angus Whiteley, said the product is underpinned by a commercial timberland return, which is expected to be around 5%, with the rest of the returns coming from the value of carbon credits that are returned to investors. Whiteley noted that 65% of the fund's allocation will be for afforestation, which will include the restoration of natural forests as well as plantations managed for commercial use.
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Stafford will invest in sustainably managed timberland and provide a source of low-carbon raw wood materials. Investors can also expect around 30 million verified carbon-offset credits and an investment with a negative carbon intensity profile. The fund's reporting framework also supports the decarbonisation of institutional investment portfolios.
Whiteley added that the firm believes commercial forestry is attractive, with the potential for return significantly above expectations. The overall return for investors can be between 9% and 11%, depending on how the market plays out. There's also the potential for LGPS not just to sell the carbon credits they will receive but also to use them to achieve their decarbonisation goals, said Whiteley. There's always the potential downstream for the pension schemes to use the carbon credits and retire them to meet their net-zero liabilities and targets.
Stafford has extensive experience in the sector, with a 22-year track record of investing in sustainably managed timberland plantations, making it a leading global timberland investor. As an investor in global forestry and low-carbon solutions in infrastructure and private markets, Stafford committed to the Net Zero Asset Managers (NZAM) Initiative to encourage asset managers to support the 2050 net-zero goal.
The fund will remain open to institutional investors during 2023, with Stafford aiming to complete fundraising by the end of the year, offering investors a good pipeline of opportunities. Giving back to nature is good for business and great for the planet. Your business can start benefiting today from incorporating trees with DGB.
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