Singapore’s Temasek Invests in Forest Fund as Carbon Tax Looms

(Bloomberg) -- Singapore state-owned investment firm Temasek Holdings Pte is backing a new southeast Asian forestry fund as the city-state looks to increase a carbon tax on its biggest emitters.

Temasek is among investors including Sumitomo Mitsui Trust Bank that are investing $120 million into the New Forests Tropical Asia Forest Fund 2, according to Sydney-based New Forests Chief Executive David Brand. He anticipates an annualized return of between 14% and 18% over its 10-year life.

The investment comes as Singapore plans to ratchet up the tax it charges on green-house gas pollution to S$25 (74 cents) a ton from S$5 when it was first implemented by 2024. New Forests, founded in 2005, is a nature-based real assets manager with about A$7.7 billion ($5.6 billion) in assets including timber plantations and conservation areas that restore the ecosystem.

Investors around the world are increasing focus on environmental factors amid the rise in temperatures and calls from shareholders to more quickly address their roles in financing climate change.

In an interview, Brand said the fund will hunt higher value hardwood timber assets, such as teak, that can be used for furniture and flooring, rubber trees for wood and latex production as well as eucalyptus for veneer or composite building materials. It's the firm's second fund to target southeast Asian forestry assets.

Further Capital Raise

After closing the first round of funding, New Forests expects to raise additional capital for the new fund with an aim of reaching $300 million this year. Investors in the initial phase included sovereign wealth funds and corporates from countries including Australia, Europe, Japan, Singapore and the U.S.

While not a core part of its operation, the manager can issue carbon credits on its forestry assets “that have positive climate impact,” he said.

“There is a facility within the fund that some of the investors can actually buy the carbon units,” Brand said.