Agriculture and timberlands investor New Forests Asset Management has made an additional equity investment in Malaysia’s Acacia Forest Industries (AFI), which owns a eucalyptus plantation in Sabah, for an undisclosed amount.
The investment in AFI over the next five years will be made through New Forests’ Tropical Asia Forest Fund (TAFF) and comes nearly five years after the fund’s initial investment in the Hijauan Group, whose subsidiary Hijauan Bengkoka Plantations Sdn Bhd (HBP) is a joint shareholder of AFI.
TAFF is a $170-million fund that launched in 2012 as the first forestry fund dedicated to sustainable forestry in Southeast Asia. The fund has since taken equity positions in three forestry businesses in Malaysia, Indonesia, and Laos.
These investments include more than 150,000 hectares of land with the target of managing and establishing more than 60,000 hectares of certified plantation forestry.
Headquartered in Kota Kinabalu, AFI owns plantations on the Bengkoka Peninsula of northern Sabah. From 2015, it switched from planting primarily Acacia mangium to Eucalyptus pellita, a crop that offers additional market versatility and better resilience to locally prevalent tree diseases.
New Forests said the fresh investments will allow AFI to continue to execute its strategic plans for improving plantation quality and transitioning the company to a higher value sawlog production model.
Significant capital investments have already been made in AFI, including the construction of a new state-of-the-art nursery, refurbishing facilities and housing, and supporting local water infrastructure projects.
“The further equity investment by TAFF over the next five years will ensure that strategic initiatives like these can continue to be implemented through the AFI business,” Paul Speed, Director of Investments and Operations for New Forests in Asia and Chairman of HBP noted.
The bulk of global demand growth for timber and fibre will be in Asia over the next 30 years and the supply growth for the market demand will come from intensively managed timber plantations in the Southern Hemisphere and tropics, MaryKate Bullen, Associate Director – Sustainability & Communications at New Forests, told DEALSTREETASIA.
“Forestry is an interesting asset class because it can have not only strong market fundamentals, but strong sustainability credentials like community benefits, climate change benefits, and green products. Our fund is really the first investment to target this strategy head-on,” Bullen said.