Leicestershire County Council Pension Fund, which is valued at £5.7bn, has committed £110m to environmental, social and governance (ESG) investments in the last financial year, with half of the allocation dedicated to timberland.
The fund's annual report outlined that throughout 2022/23, it committed £55m to global sustainably managed timberland with Stafford Capital and £55m to the Quinbrook Net Zero Power Fund.
Of the £55m invested in timberland, 65% of the capital will be invested in planting new forests, 15% reforestation and 20% improved forest management. This will provide a source of sustainable low-carbon timberland materials and generate verified carbon offsets.
“The recent £55m investment to Stafford Capital’s Carbon Offset Opportunity fund presented an attractive investment opportunity as returns are generated by the growth of sustainable timber materials and sales of verified carbon offsets.
“There is an added benefit of supporting the fund’s net zero ambitions through the planting of new forests (afforestation) and reforestation which comprise of 80% of the trees projected to be planted through this investment,” a spokesperson from Leicestershire County Council told Room151.
The pension fund’s latest commitment towards sustainable timber is in addition to previous investments in timberland valued at £139m, bringing the total allocation to 3.4% of the fund's portfolio.
“Given their closed-ended nature, the fund must continue to reinvest in order to retain its exposure to timberland as capital is returned from older vintages,” the spokesperson added.
Leicestershire pension fund highlighted that its investment with Stafford Capital is part of the fund’s initiative in 2022 to “diversify” its infrastructure exposure, with it also making commitments to JP Morgan Core / Core+ infrastructure fund and to the LGPS Central Core / Core+ infrastructure fund (valued at £135m).
Alongside its timberland investment, the pension fund has also invested £55m in Quinbrook Net Zero Power Fund, which invests in solar power with battery storage, both as part of the decarbonisation of the energy system and as part of the demand for data centres.
Investments made outside of LGPS Central
Both Leicestershire’s sustainable investments in the last financial year were made outside of its pooling vehicle LGPS Central, which currently has approximately £45bn of assets under management.
“The ability to diversify into funds outside of LGPS Central was deemed necessary to gain exposure to areas of the market that the fund did not already have access to or could via the pool in a meaningful way.
“The investments outside of the pool added to the fund’s exposure to renewables and maintained the fund’s timberland exposure,” the spokesperson said.
At 31 July 2023, 55% of Leicestershire’s assets were held within LGPS Central as the fund has £2.2bn invested in the pool, with an additional c£0.9bn via collectively procured passive equity funds. It also has over £400m in uncalled commitments to various pool investments.
“The fund is committed to pooling and its strategy is to consider investment in assets through the pool when suitable, cost-effective and relevant investment solutions are available,” the spokesperson explained.
