PKA to raise timber investment to €335m as Europe’s funds buy trees

Allocations to forestry shoot up as pension fund’s seek low carbon investments.

PKA, the DKK 114bn (€15.4 bn) Danish collective pension scheme for employees in the public social and health sectors, is planning to raise its forestry investments to about €335m by the end of this year. The move accompanies a significant boost in timber allocations by European pension schemes. The Danish fund is likely to raise its commitment to timber from 1.5 to 2% of total assets, meaning it could go to market with about €70m in new money in the next month or so.
Peter Damgaard Jensen, chief executive officer at PKA told Responsible Investor: “We are discussing that by the end of the year we will have DKR2.5bn (€335m) in forestry, part of which will be in new forest plantations.”
Damgaard Jensen said the timber investments were part of the fund’s aim to limit climate change by investing in reduced carbon dioxide strategies. PKA is one of Europe’s biggest pension fund investors in responsible strategies including private equity concepts to fund health and education projects in developing countries as well as major environmental projects.
European pension funds are increasingly viewing timber as a climate change strategy.
Trees soak up carbon dioxide, the main greenhouse gas, as they grow, and release it when they rot or are burnt.
Both the £1.5bn (€2.1bn) UK Environment Agency pension fund, the £31bn Universities Superannuation Scheme and the £3.6bn London Pension FundAuthority are reviewing whether to inject money into forestry. ABP, the €211bn Dutch pension fund made its first timber investment earlier this year with a $60m (€40m) allocation to the Global Solidarity Forest Fund (GSFF), which will develop three sustainable forestry projects in the Republic of Mozambique, in south-eastern Africa, and Angola. It was accompanied in the fund by a commitment from a large US pension fund.
GSFF, an international investment manager owned by the Swedish diocese Västerås, the Lutheran church of Sweden and the Norwegian ‘Lutheran Church endowment’, said it had easily cleared a €100m target for investment in the fund.
A report issued last week by the University of Helsinki, said forests in the European Union were expanding rapidly and could help the EU achieve goals for fighting climate change. The report said forests grew by 10% in western EU countries and by 15% in the east from 1990 to 2005. The reasons included better conservation, migration to the cities, and increased productivity on farms that need less land. The estimated net expansion of forests in the 27 EU nations absorbed 126 million tonnes of carbon dioxide during the study period, equivalent to 11 percent of EU emissions from human activities. Forests in Latvia, Lithuania, Sweden, Slovenia, Bulgaria and Finland had the highest net carbon absorption.