Interview: Foresight Sustainable Forestry Company's Robert Guest on delivering green returns

It outlines how it offers “direct and liquid access to the attractive investment characteristics of UK forestry and afforestation projects” – and is looking to drive greater returns that are sustainable in every sense.

Foresight Sustainable Forestry Company (FSF), which launched at the tail end of 2021, has already built up a forestry portfolio of about 12,000 hectares, 85 per cent of which is in Scotland, as well as having raised £175 million. It is targeting a return of more than 5 per cent ahead of inflation measured over a five-year average timeframe, and says its approach to sustainable forestry is closely aligned with five of the UN’s Sustainable Development Goals.

FSF co-lead Robert Guest returned to his native Scotland to take on his current role after in 2015 joining the investment company's owner Foresight Group, which describes itself as a sustainable growth investor and is a major investor in Scottish firms.

Edinburgh-based Guest says: “If you like sustainability and [environmental, social, and governance], and you'd like an alternative that really does have inflation-beating and diversifying non-correlated properties, then we can deliver that for you – and give you your financial return.”

'We launched this forestry company to do timber supply, but to do it in the right way, in the modern way, in a sustainable way,' says Robert Guest. Picture: contributed.

FSF has 65 properties altogether – this includes 50 north of the Border, comprising 20 established forestry, 27 afforestation (planting trees in an area without recent forestry), with the remainder made up of the two types combined, and including Aberdeenshire, the Central Belt (incuding Ayrshire, Lanarkshire and West Lothian), the Borders and Dumfries and Galloway,

In its interim results published in June, it reported that it had delivered net asset value (nav) per ordinary share returns of 10.6 per cent since its initial public offering in November 2021, the month that saw COP26 take place in Glasgow, and saying it opened up investment in forestry to public investors.

Kepler Trust Intelligence stated in response to the results that FSF appears “relatively resilient to wider macroeconomic headwinds, such as inflation, as well as offering strong portfolio diversification benefits, given its low correlation to other asset classes, like bonds and equities”.

Report

FSF, which launched in 2021, has already built up a forestry portfolio of about 12,000 hectares. Picture: contributed.

FSF also noted in its interim report that it recorded a profit for the period ending March 31 of £6m, down from £7.9m 12 months previously, while its unaudited nav was £186.6m, having increased from £180.6m six months previously, with nav per ordinary share up by 3.5p over the same period to 108.5p.

“Our target is to get to half a billion [pounds] of nav within four to five years of launch,” says Guest now. “That's not helped by current equity market conditions, but it's still achievable, if interest rates can come under control, if inflation can come under control… we've got a platform to grow from.”

He stresses that part of its aim is to provide sustainable timber production amid a prevailing global imbalance between supply and demand, with the latter expected to grow to four times its current size by 2050.

“We launched this forestry company to do timber supply, but to do it in the right way, in the modern way, in a sustainable way,” he says, also citing the need to improve some negative perceptions generated by some examples of bad commercial forestry practice. Timber is versatile, very low carbon, and “a good thing to invest in”, he believes.

Speaking from a 2,000-hectare FSF project near Comrie in Perthshire, he states that the asset is “one of our flagship natural capital forestry projects” – but also serving as an example of the investment vehicle’s bid to also make a positive contribution to the local community.

He notes that the site encompasses a couple of hundred hectares of natural regen zone, while FSF consulted the local community when it presented the scheme, taking on board and making adjustments in response to fears over potential impact on a stone circle used for the summer and winter solstice.

Employment

FSF also stresses that from a job-creation perspective, its 40-plus afforestation projects will create 700 rural employment opportunities during the planting stage, while it in May announced the expansion of a skills training programme, adding six places in Scotland. “We’ve had lots of applications, from different parts of Scotland, and good gender diversity as well, which is good to see in forestry,” Guest says.

As for his own career, he has worked in sustainable investment for about a dozen years, and early on in his career served as a senior analyst covering corporate finance at Scottish financial advisory firm Noble & Company. In his current role, he does get out and about to see its projects on the ground (“in a forest or standing on a hill, you can [sometimes] learn a lot more that you can do looking at a map, in an office”), but balanced with, say, boardroom meetings and the nitty gritty of running the fund.

And its portfolio continues to expand, in its interim results pointing out that it had planted about a million trees at four afforestation schemes, creating an additional 107,500 or so voluntary carbon credit pending issuance units. "The expansion of the number of carbon credits in FSF's portfolio means that as at 31 March, carbon credits were valued at £2.5m,” it also said, adding that it has 34 further afforestation properties in the portfolio set to be planted in 2024 and 2025.

Furthermore, Guest believes FSF could lock down more “opportunistic” acquisitions, tapping into its £30m revolving credit facility, and potentially also raising new equity. He also states: “Our [long-term] goal is to get to four or five million tonnes of carbon sequestration. And when you when you think of it like that, that is something like the annual carbon footprint of Glasgow that could be impacted from our fund at our current size. If we can grow, we can do more. But that's our plan, to maximise our impact – and that has benefits for the shareholders as well.”