Launched by New Forests, a sustainable timber investment manager based in Sydney, the new fund includes an "impact" tranche — about 15 percent of the $300 million total — aimed at investors, including other foundations, interested in supporting logging bans in sensitive areas, additional carbon mitigation, the restoration of peatlands, and community partnerships to improve livelihoods, among other activities. For its $10 million investment, the Packard Foundation will receive about half the rate of return as a commercial investor, contingent on New Forests delivering on specified outcomes. By helping to reduce the perceived risk for commercial investors wary of financing non-commercial activities, the fund aims to encourage larger-scale commercial investments in climate and conservation outcomes.
"In traditional forestry valuation, there's no commercial valuation to them," Radha Kuppali, New Forests' executive director of investor services, told ImpactAlpha. "We believe they are important activities to improve the operational sustainability and resilience of those assets. But for mainstream commercial investors, these would be viewed as something that is noncommercial for them to invest in."
"We're still getting our capital back, we're still getting a return, but it's reduced versus the commercial investors," said Packard Foundation director of mission investing Susan Phinney Silver. "The idea is to use that [difference in the price of the underlying asset] to drive the impact activities and prove out to commercial investors that this isn't as scary as you think it is."