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September 28, 2021

Public funds for private gain

I remember the launch of the Scottish National Investment Bank (SNIB) as being awash with comforting soundbites.  A ‘mission impact development bank’ publicly funded ‘to build a stronger, fairer and more sustainable Scotland’ and ‘accountable to Ministers, not shareholders.’ With #NetZero the new must-have hashtag for literally everything, greenwash detectors should be switched onto a permanent state of high alert. SNIB’s recent announcement of a £50m ‘cornerstone’ investment into a private fund to attract wealthy investors into new forestry plantations sounds depressingly familiar. One wonders what £50m of taxpayer cash invested in community owned woodlands might have achieved.

Scottish Financial News

The Scottish National Investment Bank (SNIB) has committed £50 million over five years to the creation of new woodland and forestry management in Scotland.

As a cornerstone investor of the Gresham House Forest Growth & Sustainability Fund, the Bank’s capital will support wide scale new planting and is predicted to capture 1.2 million tonnes of CO2 over 20 years.

It will also target generating stable returns through the sale of timber and the capital growth of land and trees. Any trees harvested by the fund will be replanted and the timber products generated will enable the provision of raw materials for more sustainable packaging and building materials.

The fund will also aim to generate carbon credits in the form of Woodland Carbon Units (WCU) which will create additional value or be used to offset carbon emissions on a voluntary basis.

Eilidh Mactaggart, CEO of the Scottish National Investment Bank, said: “The Bank is delighted to cornerstone this new sustainable forestry fund focused on new and diverse planting in Scotland.

“Gresham House is an experienced forestry fund manager, and we are very excited to support them in this new venture.

“The new planting element and ability to generate carbon credits represents a novel investment proposition which mainstream investors have yet to fully embrace.

“The Bank’s cornerstone investment is designed to encourage other investors to follow us into this new type of forestry fund. We therefore believe this opportunity to be an excellent fit for the Bank’s ambition to lead the way on innovative mission aligned investments.”

In addition to the environmental benefits tree planting brings for biodiversity, flood defence, improved air quality, reduced soil erosion and outdoor recreation, the investment will also support existing and new jobs in rural Scotland.

Managing roughly 140,000 hectares of forestry worth more than £1.8 billion, Gresham House is the UK’s largest commercial forestry manager. The business also manages a forestry mandate in Ireland and expects to complete on a further international forestry mandate in Australia, subject to regulatory approval.

Olly Hughes, managing director, Forestry, Gresham House, added: “This impressive first close is a testament to Gresham House’s long-standing track record in the forestry space and the Bank’s cornerstone investment will help to catalyse further investment in this asset class from institutional and private client investors.

“This flexible strategy allows investors to choose to use the carbon credits generated for offsetting purposes or sell the units to create an income.

“As investors increasingly focus on sustainable investments, forestry is emerging as one of the most impactful solutions, which combats climate change and enhances biodiversity, while also serving as an excellent investment diversifier and producing meaningful uncorrelated returns.”