Stafford Capital Partners announced the initial close of its global carbon offset fund at $242 million with commitments from three UK local government pensions schemes (LGPS).
Stafford is an independent private markets investment and advisory company with US$8.1 billion in assets under management. Founded in 2000, it advises 170+ institutional clients with a team of 80+ professionals investing in:
- timberland and agriculture,
- infrastructure, and
- sustainable private equity and private credit.
Stafford Carbon Offset Opportunity Fund
Stafford Carbon Offset Opportunity Fund raises $242 million in investor commitments from three UK local government pensions schemes (LGPS). These include the LGPS of Essex, Leicestershire and the City and County of Swansea. The latter is the new addition to its investor base.
The Fund was launched in December 2022 with a $1 billion fundraising target. It is classified as an Article 9 impact fund under the European Sustainable Finance Disclosure Regulation (SFDR). It specifically aims to invest in these forestry carbon projects:
- afforestation,
- natural forest restoration, and
- improved forest management projects.
The Fund will invest directly or indirectly into assets that meet the criteria for developing carbon projects.
Stafford CEO Angus Whiteley noted:
“…the product is underpinned by a commercial timberland return, which is expected to be around 5%. The rest of the returns effectively come from the value of carbon credits that are returned to investors.”
Whiteley further said that 65% of the fund’s allocation will be for afforestation. Afforestation activities will include restoration of natural forest as well as plantations managed for commercial use.
The majority of Stafford’s timberland allocations focus on North America, Australia, and New Zealand. But as part of its carbon offset strategy, the investment firm is also looking for opportunities in Europe.
Other companies are also investing in forest conservation projects to end deforestation like the case of Everland. Through its Forest Plan, Everland seeks to protect the world’s most important and vulnerable forests.
Stafford now is looking to begin deployment of its carbon offset fund.
What Investors Can Expect Out of It
Stafford Carbon Offset Opportunity Fund offers an innovative solution to investors who want to offset their own emissions or are looking for an impact investment in the forestry sector.
Here are what investors can particularly expect from the Fund if they put their trust and money into it.
- Invest in ~200,000 hectares of sustainably managed timberland. These include ~150,000 hectares on which new commercially managed plantations will be established and natural forest planted;
- Generate ~30 million verified carbon offset credits for investors (each equal to 1 tonne of CO2);
- Provide a source of sustainable, low-carbon wood raw materials; and
- Provide an investment with a substantially negative carbon intensity profile and reporting framework that can support the broader decarbonization of institutional investment portfolios.
Whiteley further commented that when factoring in the carbon credits value, there’s some sort of crystal ball gazing with it. Thus, the company has taken a conservative view of what they see as the future of carbon prices.
With that, they’ve looked around at market consensus. The table shows various carbon credits price averages and ranges by project type.
Carbon Credit Pricing by Project Type
The firm believes that commercial forestry is attractive with the potential for return significantly above what they’re expecting. The overall return to investors can be at 9% to 11%, depending on how the market plays out.
There’s a potential for LGPS not just to sell the carbon credits they will receive, but also to use them to achieve their decarbonization goals, says Whiteley.
He added that 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.
Forest Carbon Credits in Meeting Net Zero
With a 22-year track record of investing in sustainably managed timberland plantations, Stafford has extensive experience in the sector. The company is a leading global timberland investor.
As an investor in global forestry and low carbon solutions in infrastructure and private markets, Stafford has committed to the Net Zero Asset Managers (NZAM) Initiative. The group’s main purpose is to encourage asset managers to support the goal of net zero by 2050.
The firm will continue on providing solutions that can both deliver financial returns and help drive the transition to a net zero emissions economy.
With its experience and expertise in the field, Stafford recognizes the important role that forestry has in battling climate change. As Whiteley stated:
“We believe this [carbon offset] fund will deliver the important combination of potential financial returns and environmental benefit that is so needed today. We are very grateful to the investors who have enabled us to achieve this milestone and look forward to making a meaningful contribution to their decarbonisation agenda.”
Via its Carbon Offset Opportunity Fund, Stafford continues to align its products to help address those environmental and societal needs while delivering the financial returns their clients are seeking.
The Fund will to remain open to institutional investors during 2023.
Stafford aims to complete fundraising by the end of the year, offering investors a good pipeline of opportunities.