The Nature Conservancy Hails CalPERS Move to Invest in the Ultimate Growth Fund: Sustainable Forestry

The Nature Conservancy Helps Pension Fund Craft Environmentally Sound Policy
San Francisco, CA — February 19, 2008 — The Nature Conservancy congratulated the California Public Employee Retirement System (CalPERS) for its vote today to adopt a trend-setting forest investment policy that requires certified sustainable forest management and positions CalPERS to profit from the rapidly emerging global market in forest carbon credits.

“This leading-edge policy will direct $2.4 billion in CalPERS investments toward environmentally friendly forest projects. That level of investment provides a strong incentive to the global timber industry to engage in certified sustainable timber management,” said Mike Sweeney, Executive Director of the California Chapter of The Nature Conservancy. “Good forest management provides healthy returns – for investors and for the planet.”

The Nature Conservancy began to work with CalPERS in the early stages of this new policy. “CalPERS is a savvy institutional investor. What it does can influence other institutional investors and the timber industry,” said Louis Blumberg, director of The Nature Conservancy’s California forest and climate policy program. “We were able to offer our experience with sustainable forestry and certification and to help create a policy that strengthens the institution’s long term asset while protecting forests lands.”

The vote today by CalPERS Board of Trustees creates sustainable management standards for its Forestlands Investment policy, part of a new inflation-linked assets class. The new standards require timber managers to use ecologically sustainable logging practices in order to foster long-term and steady growth of both forest and financial returns.

"Investing in forests is an important move to guard against inflation and the management practices are essential to make sure our assets are standing for generations to come," said Russell Read, chief investment officer for CalPERS.

The move by CalPERS, the nation’s largest public pension fund, continues California’s precedent-setting leadership role in fighting global warming and comes at a time when the economic benefits of forests are expanding as the result of growing worldwide demand for protecting the environmental health of the planet.

In October 2007, California became the first state to adopt emissions reductions standards that confidently account for the natural climate benefits of forests.

Forestry experts at The Nature Conservancy point out that by requiring independent, third-party certification for its forest investments, CalPERS will gain access to increasing consumer markets favoring sustainable forest products and green building materials, and keep CalPERS ahead of new regulatory actions.

Once owned chiefly by publicly-held companies, forests were managed primarily for their lumber value. Pressure from Wall Street and stockholders has recently compelled forest product companies to cut trees prematurely in order to meet short-term quarterly earnings goals.

Today’s forests are increasingly viewed by financial experts, including CalPERS, as a hedge against inflation. In other words, as trees grow, so does their value. Sustainably managed forests offer steady return potential over the long term and perform well when other assets are affected by inflation.

In addition to the income from timber harvests, sale and trading of offsets from new carbon markets, such as those developing from California’s Global Warming Solutions Act (AB 32), the European Trading System under the Kyoto Treaty, and the robust voluntary carbon market, offer the potential to generate a steady stream of cash from well-managed forests.