Green Private Equity Firm Banks On Eco Systems

Apr 11 2008 | 2:00am ET

One Australian private equity firm is looking at the forest instead of the trees when it comes to green investing.

FINalternatives has learned that Sydney-based New Forests has launched a US$100 million fund dubbed the Eco Products Fund. It is being co-managed by Equator Environmental, and is based on long-term growth prospects for ecosystem services markets, or forest land. The fund will invest in a suite of environmental credit positions associated with carbon, biodiversity and water.

“We’re specifically interested in the forest- and land-based sector,” said Radha Kuppali, director, who declined to comment specifically on the new fund. However, she added that the firm is currently involved in projects in the tropics that avoid deforestation.

"We’re seeing a lot of interesting projects come through in southeast Asia and the Pacific Islands, as well as in Latin America.”

Kuppali explained that there are opportunities for financial investors to monetize the fact that carbon is stored within forests. This can be done through the sale of credits to carbon manufacturers and, in the case of the firm's most recent project in Borneo, rehabilitating forests for wildlife management and protection of endangered species in return for the sale of credits to palm oil manufacturers.

The firm in November entered into an agreement with the Sabah State Government of Malaysia to jointly develop a wildlife habitat conservation bank to be implemented in the Malua Forest Reserve on the island of Borneo. Under the agreement, the Sabah State Government will allow New Forests to sell 'units' of biodiversity protection to palm oil developers and energy companies. The money raised from the units would fund rehabilitation and protection of this particular forest, which is home to a large population of orangutans and other endangered species.

“Because we’re creating an improvement in the eco-system’s value, we’re basically monetizing that in per hectare units and we sell those as credits to the palm oil supply chain,” said Kuppali.

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