Manulife Launches Forest Climate Fund to Raise $500 Million

Manulife Investment Management launched its Forest Climate Fund (FCF) which aims to raise $500 million to buy sustainably managed forests that sequester carbon.

Manulife is branching out into forest carbon credit markets. The world’s biggest timberland investment manager is raising funds to buy sustainably managed forests where capturing carbon in standing trees is more important than cutting them down for profits.

Manulife Investment manages about 6 million acres of timberland in the Americas and Oceania on behalf of investors. The firm said it will raise the $500 million fund from its parent company, Toronto insurance and financial-services firm Manulife Financial Corp., and other institutional investors.

The managing director of Manulife Investment Management’s impact investing Eric Cooperström said:

“We are excited to bring a product to investors that we have developed by capitalizing on our decades of experience in sustainable timberland management and on our carbon market expertise…”

The Manulife Forest Climate Fund

With the launch of its Forest Climate Fund, Manulife is the latest financier to use forest carbon credits in its climate strategy.

It joins the likes of Oak Hill Advisors LP, a subsidiary of T. Rowe Price Group Inc., which paid $1.8 billion for 1.7 million acres of forests to harvest carbon offsets. Last year, J.P. Morgan Asset Management also bought timberland manager Campbell Global LLC. eyeing the carbon markets.

The FCF is a closed-end fund that allows investors to promote climate change mitigation through sustainably managed forest assets.

The Fund seeks to include investors from other jurisdictions apart from the U.S. such as the EU to invest in forest carbon credits or offsets. But once offered outside the US, investors must follow the Article 9 of the EU Sustainable Finance Disclosure Regulation requirements.

Carbon credit markets have boomed as more firms pledge to reduce their unavoidable emissions via offsetting. Buyers are pressuring sellers to ensure that offsets represent actual changes in timber harvesting.

Tom Sarno, Manulife Investment global head of timberland investments, commented:

“We believe high-integrity, verified carbon credits will continue to be viewed as premier decarbonization instruments and that, in time, such carbon markets will eventually come to resemble that of more traditional commodities…”

The Manulife Forest Climate Fund will deliver durable, high-quality carbon value to investors through carbon credits. FCF will focus on forests with strong carbon potential, high conservation value, and sustainable management plans.

The fund will provide investors with high-integrity climate benefits and financial returns by using:

carbon credits,
conservation easements,
value-added strategies, and
limited timber harvests.

Manulife Sustainable Timberland Management

Manulife has a long history of timberland management that began in the 1980s. It was before known as the Hancock Timber Resource Group.

Today the company is the largest in the world, by acreage, of Timberland Investment Management Organizations. They are like private-equity firms that use raised cash to buy forestlands instead of companies.

Last year, the firm bought 89,000 acres in northern Maine to be a model for the type of properties that Manulife Forest Climate Fund will buy. It has reserved the option to sell the credits from the forests or hold them and use them toward its parent company’s efforts to slash its own footprint.

FCF investors will also have the same choice – either to receive the cash from returns or use carbon offsets.

The Fund is part of Manulife’s approach it calls “sustainability and responsible investing (SRI)”. Through it, the firm integrates environmental, social, and governance (ESG) factors through all aspects of its business.

Sustainable timberland management is under one of its five sustainability priorities: climate stability. To date, Manulife’s integrated timberland management operations comprise about 6 million acres across 6 countries and ~100 individually managed properties. The firm was able to achieve these results:

100% of its forests globally are certified sustainable
2.7 million tons of CO2 removed by its forests annually (5-year trailing average)
6.1 million carbon credits sold

Forestry Assets and The Carbon Market

The firm’s current portfolio of sustainably managed forestry assets is internationally diversified across the U.S., Canada, Australia, New Zealand, and South America.

But its forests are mostly in the U.S., which represents over 95% of improved forest management carbon credits issued and retired to date.

Forestlands have been one of the most valuable nature-based solutions to combat climate change. Climate investors find that protecting forests (REDD+) is crucial in winning the fight and so they’ve been betting on carbon credits as forestry assets. 

The chart below shows the issuances and retirements of carbon credits by type (April 2022 year to date). In 2021 alone, REDD+ accounted for one of the major issuances (27%) and retirements (38%).

Source: Carbon Direct

A lot of similar efforts are in place today that generate forest carbon credits. Each credit represents one tonne of carbon sequestered by the trees.

For instance, Everland’s Forest Plan seeks to stop deforestation by 2030 by developing up to 75 forest conservation (REDD+) projects around the world. Some startups were also raising funds to develop technologies for forest management where carbon credits help fund their projects.

Manulife intends to make its Forest Climate Fund open to institutional investors globally while being subject to local ESG regulations.

The firm is pitching typical timberland fund investors. These include pensions, endowments and wealthy families, as well as companies that aim to reduce emissions via offsets.

The post Manulife Launches Forest Climate Fund to Raise $500 Million appeared first on Carbon Credits.

Batteries From Wood: A Renewable Energy Storage Solution

Companies worldwide are working on a sustainable power storage solution using renewable biowaste called lignin to make wood batteries.

One of the largest private forest owners in the world, Stora Enso, recently built a production facility worth €10 million to create bio-based carbon by turning trees into batteries.

Producing these wood batteries is possible by using a biomaterial known as lignin.

How Lignin is Made to Create Wood Batteries

Lignin is one of the most common organic polymers, second to cellulose, that’s abundant in the cell walls of some plants. It makes the structure of the plant firm and doesn’t easily rot.

This biomaterial makes up about 30% of the wood’s total composition. In fact, it’s present in all vascular plants and can have a carbon content as high as 60%.

Lignin separates from wood during the production of cellulose fibers from its pulp. After extraction, the by-product is turned into a fine carbon powder.

The powder is then made into electrode sheets and rolls. The sheet can then go with other battery parts, replacing mined graphite, which has a much larger carbon footprint.

Advocates believe that the carbon found in lignin would be enough to end the use of fossil fuels and mined metals in making lithium-ion batteries that need graphite to work.

Here is the process of making batteries from lignin.

According to Stora Enso:

“With Lignode, we can provide a bio-based, cost-competitive and high-performance material to replace the conventionally used graphite… To serve the fast-growing anode materials market, we are now exploring strategic partnerships to accelerate scale-up and commercialisation in Europe.”

The Northvolt Deal

Stora Enso is joining forces with Volkswagen-backed battery developer Northvolt to produce lignin-based batteries. The source for the wood batteries will be from Nordic forests under sustainable management.

Through the partnership, Northvolt will be responsible for cell design, production process development, and scale-up of the technology. While Stora Enso will provide the wood-based anode material lignin.

The deal comes when critical mineral availability poses a significant barrier in sustainable battery and energy storage systems. The creation of renewable batteries offers a greener alternative to the critical mineral geopolitical chess game.

Apart from being one of the largest renewable sources of carbon, the use of lignin in producing wood batteries brings many benefits.

Key Benefits of Lignin-Based Wood Batteries

Graphite has been the main source of making lithium-ion batteries used in making electric cars. For Tesla to make its annual target of 20 million EVs, it has to mine ~1 million tonnes of graphite.

Add to this the future demand for electric airplanes and almost all other portable electronic devices. Hence, engineers find it bothersome how the world can meet those future demands for e-mobility.

Wood Batteries offer 5 major benefits as a renewable energy technology:

Scalability: viable to produce wooden batteries commercially due to the wide availability of the resource needed to make them – trees.

Sustainability: By sourcing raw materials from sustainability-certified forests.

Renewability: By using natural resources removes the need to source battery manufacturing in China and other regions that have a higher carbon intensity.

Faster charging: a fully functional wood battery can charge at a faster rate than fossil-fuel derived graphite.

Better performance at lower temperatures: the battery is operational under cooler temperatures, making it possible to for a wider range of operations .

Lignin-based carbon is applicable in storing energy for a wide variety of uses, power automotive systems. This industry has seen tremendous growth after the pandemic with a 46% increase in sales of EVs such as scooters and e-bikes.

The post Batteries From Wood: A Renewable Energy Storage Solution appeared first on Carbon Credits.