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Wall street company makes a $1.8 billion investment in the carbon market

Oak Hill Advisors, one of the major players in credit markets, made the biggest bet yet on the forest carbon market, in the amount of $1.8 billion. A transaction initially planned at $500 million, Oak Hill Advisors managed to secure a $1.8 billion transaction. Thus, the company acquired 1.7 million acres of forest.

Wall street company makes a $1.8 billion investment in the carbon market-1

Oak Hill bought the timberland from The Forestland Group (TFG), who bought the 2.3 million acres of timberland from families spanning over 17 states in the easter region of the United States. Mainly hardwood forests, the 56 properties of TFG were integrated in a plan focused on natural regeneration of forests.

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In managing their 1.7 million acres of forest, Oak Hill partnered with Anew Climate. Anew pledges to focus on reducing lodging. In fact only 10-20% of the revenue is destined to come from wood harvests. This makes Oak Hill not only one of the ten largest timberland owners in the U.S., but also the only one focused on forest carbon markets.

According to Jamie Houston, the unit head of Anew, “We’re really going to be focused on forest health. We’re thinking about this in decades, not years.”

The perspective adopted by the company is long-term oriented. They expressed their preference to allow for the forests to sink in more carbon as the market matures. This strategy is in opposition to some timberland owners who are eager to produce and circulate carbon credits.

Forest carbon credits are meant to incentivize large timberland owners to log their wood less, in exchange for preserving the forests as large carbon sequestration sinks. That means that for every tonne of Co2 emitted, half remains in the atmosphere, while half is stored in forests and oceans. Preserving these huge carbon sinks is crucial to preserving biodiversity and natural habitats, not only locally, but with globally trickling down effects. 

At the same time, forest carbon credits are destined for companies that aim to reduce their carbon emissions. The market has matured a lot in the past decades. Predictions point that by 2050 will show an approximately 17 fold increase in comparison to 2020 market volume. This is mainly considered to be due to an increasing number of companies aiming to offset their emissions in accordance to regulations, or voluntarily.

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