Portland-based forest investment firm EFM has partnered with a subsidiary of Japanese conglomerate Sojitz Corporation to launch a US-focused timberland vehicle seeking to raise $200 million from Japanese LPs.
The new joint venture, EFM Sojitz Management, will acquire and manage US forestland using climate-smart forestry practices aimed at generating returns from timber production, carbon credits, conservation easements and other ecosystem services.
The venture will be managed in partnership with Sojitz Corporation of America, the Tokyo-headquartered trading group’s US arm.
EFM expects “initial participation” from both Sojitz and Tokyo-headquartered Fuyo General Lease.
EFM managing director Amrita Vatsal told Agri Investor she expects the firm to reach a first close for the EFM Sojitz Management vehicle within a few months and that the close will likely include commitments from both LPs.
Vatsal explained the fund will focus exclusively on Japanese investors and said EFM’s relationship with Sojitz began after the firm surfaced within a study of the global forestry market conducted by Sojitz’s Energy Transformation Division last year.
“They have very deep expertise across energy, metals, automotive and a whole host of other sectors; they are a very broad, diversified company and like most other companies in Japan, are thinking about their commitments to decarbonization and taking them very seriously and thinking about the impact of climate change on their businesses,” Vatsal said, who joined EFM as a director in 2011, according to her LinkedIn profile.
Japanese companies’ increased interest in forestry and carbon credits in the last five years is in part a response to steps by Japan’s central government to formalize and support emissions commitments made under the UN Paris Accord framework, Vatsal said
“There are very significant regulatory steps that the government is taking to meet its goals across different sectors. Japanese corporations are responding to that in a very significant way,” she said.
“What you’ve seen is the understanding that forestry as an asset presents an interesting value proposition because of the value of lumber, but it also presents a very interesting climate solution and climate opportunity because of its ability to produce high-quality carbon credits.”
It is largely in support of voluntary commitments that Japanese companies would be making investments in the JV’s forestry offering, Vatsal said. She added LPs will have the option to take credits for their own use as regulations evolve or use them in any other way to support their own net zero accounting.
“We do know that in the future, voluntary markets and compliance markets may intersect in some way. I can’t speculate on that, but what we do know is the access to high-quality credits, and removals in particular, will be in short supply,” Vatsal added. “Companies are working to secure access to valuable carbon credits in the future.”
Fundraising efforts for the EFM Sojitz Management vehicle may involve travel to Japan by EFM executives, she said, but will certainly include receiving visits from potential Japanese investors.
The strategy calls for a deal focus on areas of the US with an overlap between climate resilience, strong timber production fundamentals and opportunities for ecosystem services monetization, Vatsal said.
“We’re particularly interested in the western United States and the in the Pacific Northwest region in particular,” she added.
Last month, EFM drew from its 2004-vintage evergreen Fund I and its Fund IV, which is currently seeking $300 million, to fund its portion of a deal that saw it act as part of a consortium that included Climate Asset Management to acquire a 68,000-acre property in Washington State.
The transaction also included sales of carbon credits to Meta to be delivered through 2035.
EFM was founded in 2004 and describes its experience as including having managed 200,000 acres of forestland in the Pacific Northwest and elsewhere.
AloJapan.com