National Employment Savings Trust, London, is exploring an investment in forestry and is already undertaking "market warming" with managers to test whether there's a viable path to go ahead with an allocation, a spokesman confirmed.
The £25 billion ($30.5 billion) master trust is evaluating the potential opportunity in forestry — its initial focus as part of a wider look at natural resources — with fellow multiemployer defined contribution plan Cushon, London, which has £1.7 billion in assets.
NEST is testing the waters to see what reaction it gets from managers, and is looking for reassurances on managing ESG risks and costs associated with an investment in forestry, the spokesman said. While there's no firm commitment on how much the plan would deploy into a forestry strategy, executives estimate about a 2% allocation to forestry and other natural capital projects, he added.
The plans are not looking to access forestry through a commodity strategy, a joint news release said.
"Forestry's historical risk and return profile may make a compelling argument for a strategic allocation," Mark Fawcett, CIO at NEST, said in a joint news release. "Any investment should only grow in value as greater importance is placed on natural capital and the carbon removal and offsetting industry develops."
Mr. Fawcett said the two plans have "started our market warming and I'd encourage fund managers with experience investing in forestry to get in touch, outlining how schemes like NEST and Cushon could enter the market. One challenge we're conscious of is making investments at scale in this space — we'll need to explore with managers how much money they can actually put to work in timberland on an annual basis, and how much it will cost."
The two plans want to discuss with money managers how they could directly invest in forestry on a global basis, with other considerations including managing investment risks, the impact on biodiversity and management of forestry risks such as pests, and information regarding carbon credits.
While there is no official link between NEST and Cushon, the two are working together since they both have an interest in natural capital, the spokesman added.