Large fund invests in responsible forestry

A safe bet in an unstable market

As an investment object, forests are more robust than shares in times of economic trouble. And the growing recognition of the role played by forests in carbon sequestration is likely to increase the value of forest property.

“We decided to invest in forests as part of a strategy to spread our investments and to minimize risk”, explains Henrik Gade Jepsen, CIO-beta at ATP.  "However, once we made that decision it was also important for us to minimize the clear business risk associated with forestry to low standards", he adds. “That is why we started to explore the various certification schemes and the assurance for good forestry which they can offer”.

FSC standards form the baseline

“After having explored the issue thoroughly, we have adopted the policy to invest in forests that are in compliance with the FSC standards. In most cases, this means that the forests we buy must be or become FSC-certified. However, our focus is more on minimizing risks that come with low-standard forestry than on gaining market benefits from a specific labeling scheme, and in some cases we do make exceptions”, explains Gade Jepsen. 

“For example, ATP will not request certification of smaller properties, for which certification is so far not a financially viable option. Instead, these properties will be contractually obliged to comply with the applicable FSC requirements.

Also, in the US we accept the SFI standard, with some additional requirements (releated to environmental issues, chemicals use, work standards and issues concerning indigenous people) as our baseline – we call this 'SFI+'".

ATP expects to invest in forests primarily in North America, Australia, New Zealand and possibly Eastern Europe. 

Assistance from NEPCon and the Rainforest Alliance

NEPCon and the Rainforest Alliance assisted ATP in assessing the competences of forest managers responsible for managing the company’s overseas forest estates. “The inputs from NEPCon and the Rainforest Alliance were a great contribution to our overall process”, says Gade Jepsen. 

NEPCon helped to develop assessment criteria allowing third-party verification of the managers' skills to implement the forestry quality criteria adopted by ATP. Staff from NEPCon and the Rainforest Alliance subsequently performed the evaluation of forest managers, according to the developed criteria. NEPCon also provided a comparative analysis of the two major forestry schemes used in the US, FSC and SFI. The analysis formed part of the basis for ATP's decision on its forestry criteria and policies.

About ATP

ATP provides pension coverage to almost the entire Danish population, paying pensions to more than 675,000 pensioners and administering contributions for approximately 4.5 million members and clients.

With a total investment portfolio of more than EUR 50 billion, ATP is one of Europe's largest pension investors. ATP's supervisory board has adopted a revised Policy of Corporate Social responsibility in Investments reflecting the intention of ATP to commit more resources to Social Responsibility in Investments. In 2008 and 2006, ATP was voted the best Public European pension fund, the IPE Silver Award. 

Sources: ATP and Danish newspaper Børsen