Agenda item

The Committee considered a report of the Director of Corporate Resources which provided information on the Leicestershire Pension Fund (Fund) investments held with Stafford Capital Partners (Stafford) and the performance of the timberland and carbon credit markets generally. A copy of the report marked ‘Agenda Item 8’ is filed with these minutes.

Mr Stephen Addicott, Mr Marek Guizot and Mr Dermot McCloskey were in attendance and supplemented the report with a presentation which is also filed with these minutes.

Arising from the presentation the following points arose:

i.          A Member raised concerns about whether greenfield land was being taken away that could have been used for agricultural food production. Stafford Capital explained that timber planting occurred in low-grade cattle country cleared up to 70 years previously. This type of land had been left with low intensive management, and not high-grade food production areas. Forests would also be returned to areas that had previously been forests.

ii.          As part of the Carbon Offset Opportunities Fund, which was an Article 9 fund under the Sustainable Finance Disclosure Regulation (SFDR), carbon offsets would go back to investors at around year five, with the option of holding those offsets themselves to offset their own emissions, or selling the offsets.

iii.          A Member queried the percentages produced of softwood versus hardwood. It was explained that it was dependent on the country invested into, for example, New Zealand was almost 100% softwood as there were few hard wood species that grew well in New Zealand due to the climate. Hard woods anticipated in the carbon fund were grown within Latin America. On balance around 70 percent of funds were invested in softwoods with around 30 percent in hardwoods, the majority being eucalyptus, and not necessarily hardwoods going into the furniture market.

iv.          A Member asked how shipping emissions were measured given the major carbon footprint. Shipping logs from New Zealand to China was given as an example as a far more efficient way of moving logs and emissions were quite low. It was explained that the organisation’s boundary stopped at the entrance to the port. However, accounting for scope three emissions once it left the port was work in progress as it was more complex with more components involved. As an estimate, it was expected to be less than 10 percent of the total sequestered carbon in terms of volumes associated with transport.

v.          A Member queried the harm done to the natural biodiversity when planting forests with, in particular, larch and pine trees. Members were informed that the land used had a very low level of biodiversity on it. In addition the organisation had zero tolerance of land clearing so there was not clearance of any natural forest, and planting acted as a natural buffer and provided added protection to remnant stream side vegetation.

vi.          It was further explained in comparison between plantation development and natural forest restoration, the former was about half the cost, but provided four times the carbon credits because of the growth rates. Stafford firmly believed that the trade-off from low-level quality pasture that had been cleared to the establishment of commercial forest for wood production and natural forest was a huge net benefit on those particular properties established, and of huge benefit to the local landscape. Also, as an added benefit, the organisation would be establishing a biodiversity baseline across the land parcels being bought up to plant and would be measured on an ongoing basis. It was further noted there was some volatility and risk in investing in carbon credits but that there was a base return of six percent for investors and a significant upside on the investment.

vii.          A Member asked what happened to the following the sale of plantation land. It was noted that in order to register carbon credits there was commitment to maintaining a forest property in perpetuity associated on the title of the land so that a purchaser would not be entitled to clear the land, or if they did, they would have to re-buy back the carbon credits which would be an impediment for the buyer. However, usually buyers were existing plantation forestry companies.

viii.          A Member asked what the timeframe was for softwood compared to hardwood reaching the market. It was explained that softwoods would typically have a growing period of around 30 years, whereby hardwoods such as eucalyptus were grown over shorter periods of around eight to ten years for pulpwood, or over longer periods for use in producing saw timber. The plantations also had fire break corridors that were based on the physical features of the landscape such as rivers or streams with buffers and facilitated the movement of wildlife.

RESOLVED:

That the Stafford Capital Partners Timberland update report and presentation be noted.

Mr Addicott, Mr Guizot and Mr McCloskey left the meeting at this point.