Global investment manager Nuveen has launched its Global Timberland strategy that seeks to provide investors with targeted exposure to sustainable timberland investments in core geographies, including the US, Chile, Uruguay, Canada, New Zealand and Australia.
As global investors seek to transition portfolios to net zero by 2050, timberland investments could play a significant role. The strategy, the company shares, provides a natural climate solution to reduce carbon emissions by producing more timber on less land, reducing emissions through efficient operating practices and sequestering and storing carbon in soil and trees.
Natural climate solutions are the lowest-cost scalable route to climate mitigation and according to the World Resources Institute can provide up to 30% of the emissions reductions needed by 2030.
Global demand for timber is expected to grow by up to 200% by 2050, the Wuppertal Institute for Climate, Environment and Energy points out, owing to increased demand from a continued growth in global population and per capita income, presenting a compelling return opportunity for timber production.
The investments, Nuveen states, will target a net total return of 5% to 7% annually from the sale of timber, land sales, carbon offsets, conservation easements and the natural appreciation of the assets, with a targeted 2% to 3% annual cash yield. It offers a unique global exposure, blending a stable US dollar return profile with access to the potential for high returns, uncorrelated strategies outside of the US.
“In the current economic environment, real asset characteristics make timberland an attractive inflation hedge, with downside risk mitigation against different economic cycles and stable income,” says Martin Davies, head of Nuveen Natural Capital. “Timberland is an intrinsic investment in natural capital assets. With trees storing carbon, it is a proven and low-cost technology to remove greenhouse gas emissions from the atmosphere.”