ESG Club


REAL ASSETS; REAL SOLUTIONS


Christoph Schumacher is global head of real assets at Manulife Investment Management


The world is rapidly waking up to the dan- gers and risks posed by climate change, with sustainable and responsible invest- ing fast becoming one of the most impor- tant


investment criteria globally. We


believe investments in real assets can be a key part of helping to mitigate some of the most critical challenges we face: cli- mate change, biodiversity loss and socio- economic inequality.


Investing in nature to address climate change Natural climate solutions (NCS) are land management decisions that increase car- bon storage or prevent greenhouse gas emissions across global forests, wetlands, grasslands and agricultural terrain. Trees and soils have tremendous potential to sequester carbon, since research indi- cates that NCS “can provide over one- third of the cost-effective climate mitiga- tion needed between now and 2030 to stabilise warming to below 2-degrees”¹. By acting as ‘natural sinks’, which capture carbon from the atmosphere, timber and agriculture also occupy the low end of the carbon sequestration cost curve.² In forestry, various improved forest man- agement practices, such as protecting and restoring high-conservation areas, defending watercourses, supporting native and managing invasive species, extending or limiting harvest cycles, restricting chemical usage and maximise opportunities for carbon sequestration. In agriculture, regenerative practices such as cover cropping, reduced tillage, orchard recycling, compost deployment, integra- tion of livestock and pollinators, sustaina- ble water management and integrated pest management are used.


Close alignment with the UN Sustaina- ble Development Goals


In addition to their carbon sequestration benefits, we believe investments in tim- berland and farmland can contribute to meeting other non-financial environmen- tal, social and governance (ESG) objec- tives. Commercial production on sustain- ably managed properties aligns closely with the United Nation’s sustainable development goals (SDGs), particularly, zero hunger, clean water, decent work and economic growth, climate action and life on Land. Timberland and farmlands are generally located in rural areas, where the commercial


operation of forests and


farms can deliver significant economic benefits. Institutional investors’ access to capital can help accelerate the deploy- ment of new science, technology and management regimes that will allow for higher yields alongside more efficient use of resources. Consequently, institutional investment in timberland and farmland properties can deliver competitive finan- cial returns while simultaneously improv- ing environmental and social conditions.


UN sustainable development goals


Detailed actions


Scale allows us to achieve food security in countries where we operate and beyond


Deploy and promote sustainable agriculture practices


Maintain and enhance agricultural productivity Use water efficiently to grow healthy crops


Seek out new practices to reduce water usage throughout our operations


Use ground storage to capture rain and flood waters


Natural resource investments provide social benefits both locally and globally


Create jobs in rural communities


Promote safe and healthy working and living environments


Create carbon sequestration opportunities lnvest in renewables and energy efficiency


Support scientific studies and policy analysis on global change


Protect sensitive lands and biodiversity Third-party certification of our timberlands Conservation easements


1) Natural climate solutions”, Natural Academy of Sciences of the United States of America, October 31, 2017. 2) “Carbonomics: the green engine of economic recovery”, Goldman Sachs Equity Research, June 16, 2020. 3) “Surging food prices fuel surprise farm recovery”, The Wall Street Journal, January 22, 2021.


For more information or to discuss the attributes of timberland and agriculture in more detail, please visit manulifeim.com/investingintimberandagricultureUK


In the UK: Issued and approved by Manulife Investment Management (Europe) Limited. Registered in England No.02831891. Reg- istered Office: One London Wall, London EC2Y 5EA. Authorised and regulated by the Financial Conduct Authority. In the EEA: Issued and approved by Manulife Investment Management (Ireland) Limited. Registered office located Second Floor, 5 Earlsfort Terrace, Dublin 2, D02 CK83, Ireland.


40 | portfolio institutional | March 2022 | issue 111


PI Partnership – Manulife Investment Management


Real assets with complementary investment attributes


Alongside their sustainability benefits, timberland and agriculture offer portfolio diversification, attractive risk/return char- acteristics and a natural inflation hedge. They also represent a way to benefit from increasing global consumption trends that are favourable for demand, and from growing interest from investors intent on “decarbonising” their portfolios. During the past 40 years, timberland returns have been positively correlated with inflation. Our assessment of the tim- ber market in the first half of 2021 sug- gests that the current rebound in infla- tionary


pressures seen in developed


economies could translate into improve- ments in return performance for US tim- berland assets. And the outlook for the US farm sector has improved significantly on recovering global demand combined with falling inventories³.


Investments in timberland and agricul- ture have historically demonstrated low volatility and attractive risk-adjusted returns.


These asset classes are not without risks, as we have seen with the forest fires across the globe. It is, therefore, impera- tive that investment managers recognise the importance of sustainability in forestry and farmland management and clearly demonstrate to investors how they are managing these risks through disci- plined due diligence and credible certification.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56