Fund managed by I Asset Management acquired 2.5 thousand hectares of forest in Latvia2021 04 09
Baltic Green Fund was represented in this transaction by the law firm AAA Law and the Latvian law firm Diligentia. The whole negotiation process took three months to complete the transaction.
Further development is planned in Latvia and Estonia, and no opportunities are seen in Lithuania
“The transaction in Latvia is an important strategic step for the Fund in further expanding and consolidating investments in sustainable forestry. For investments in Latvia, we have chosen a forest whose age offers the greatest potential for biological growth. From now on, we already manage more than 5 thousand hectares of forestland in Latvia alone. We are exploring new acquisitions in Latvia and Estonia. In Lithuania, unfortunately, we no longer have the opportunity to invest in sustainable forestry. The acquisition restrictions have almost completely stopped new investments in Lithuania and thus have a very negative impact on the competitiveness of this asset class, ”says Simonas Jurgionis, Member of the Board of I Asset Management and Investment Director of Baltic Green Fund.
International standards for sustainable forestry
“All forest assets already acquired and to be acquired are and will be maintained and certified in accordance with the international sustainable forestry standards FSC (Forest Stewardship Council). In order to maintain this certificate, a mandatory annual audit of forestry activities must be performed. One of the most important requirements of this certificate – the restriction to cut more than 80% of annual biological growth” says S. Jurgionis.
Fund’s strategy has been shaped by investors’ growing focus on the environment
According to S. Jurgionis, the Baltic Green Fund has developed its strategy taking into account the highest sustainability standards and environmental requirements. At the heart of the Fund’s strategy is the cultivation and planting of younger forests and the exploitation of their biological potential.
“Our strategy is a good example of how sustainable and responsible operations can also provide a sustainable return on investment – a growing number of investors who value not only a return on investment but also the environmental sustainability of the asset class itself. For most of the fund’s investors, sustainable forestry was the main reason for deciding to invest in this asset class, as the forest with the highest biological potential also absorbs the most carbon dioxide as it grows. In this way, we can not only create added value for our investors, but also make a significant contribution to environmental goals and promote sustainable and responsible forestry in the Baltic States, ”says S. Jurgionis.
“We have already gained the trust of institutional investors and attracted significant capital. This allows us to achieve our strategic goals at a much faster pace than at the beginning of the fund. We invest the attracted capital by acquiring both individual small plots (20-100 ha) and already consolidated portfolios, if they are in line with the fund’s strategy.” says S. Jurgionis.
The fund aims to consolidate as large a forest portfolio as possible in all three Baltic countries over seven years of operation and to sell it to a financial or industrial investor who will continue sustainable forestry at the end of the fund’s life. The term of the fund is eight years, with the possibility of extension for another two years. Baltic Green Fund has been operating since 2019.
The fund uses a conservative borrowing strategy to achieve its return targets. Borrowed capital may not exceed 50% of total value of assets under management. A conservative loan-to-asset ratio has been chosen so that even in times of crisis, debt does not require any changes in the fund’s strategy. The Fund’s chosen financial partner in Lithuania and Latvia is Citadele Bank.
Seeks to change stereotypes in Lithuania as well
“Although there is a rather ambiguous opinion in the society about investments in forestland, the Fund is determined to change this opinion with its strategy and actions. In Lithuania, we manage a maximum of 1.5 thousand. ha, but we hope that our example will help to change the situation in Lithuania as well, opening up opportunities for those who want to develop sustainable forestry, ”says S. Jurgionis.
“Investing in forests can be sustainable and benefit not only investors but also the environment and society as a whole. Only by encouraging investments in this industry, it would be able to develop, be competitive and meet the highest standards of sustainability for forestry. A good example of a sustainable forestry business is the Scandinavian countries. It is possible to achieve this in Lithuania as well, but this requires systematic steps not only by business, but also by the government, ”says S. Jurgionis.