FORESTRY managers have said the sector is emerging as one of the “most impactful” solutions for sustainable investment as the Scottish National Investment Bank announced a £50 million fund for the creation of new woodland and forestry.

The bank is investing in the sustainability fund of forestry managers Gresham House, which oversees about 140,000 hectares of woodland worth more than £1.8 billion.

Its capital will support widescale new planting and is predicted to capture 1.2 million tonnes of CO2 over 20 years as a cornerstone investor of the Gresham House Forest Growth & Sustainability Fund.

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It will also target generating stable returns through the sale of timber and the capital growth of land and trees.

Any trees harvested by the fund will be replanted and the timber products generated will enable the provision of raw materials for more sustainable packaging and building materials. The fund will also aim to generate carbon credits called “woodland carbon units” which will create additional value or be used to offset carbon emissions.

Olly Hughes, managing director, forestry, Gresham House, said: “This impressive first close is a testament to Gresham House’s long-standing track record in the forestry space and the bank’s cornerstone investment will help to catalyse further investment in this asset class from institutional and private client investors.

“This flexible strategy allows investors to choose to use the carbon credits generated for offsetting purposes or sell the units to create an income.

“As investors increasingly focus on sustainable investments, forestry is emerging as one of the most impactful solutions, which combats climate change and enhances biodiversity, while also serving as an excellent investment diversifier and producing meaningful uncorrelated returns.” Gresham House is the UK’s largest commercial forestry manager, and the business also manages a forestry mandate in Ireland and expects to complete on a further international forestry mandate in Australia, subject to regulatory approval.

It said that on top of the benefits tree planting brings for biodiversity, flood defence, improved air quality, reduced soil erosion and outdoor recreation, the investment will also support existing and new jobs in rural Scotland.

Eilidh Mactaggart, SNIB chief executive , said: "The bank is delighted to cornerstone this new sustainable forestry fund focused on new and diverse planting in Scotland.

"Gresham House is an experienced forestry fund manager, and we are very excited to support them in this new venture.

"The new planting element and ability to generate carbon credits represents a novel investment proposition which mainstream investors have yet to fully embrace."