Stockholm (NordSIP) – As sustainable investors look forward to a year of continued focus on biodiversity, forestry is likely to remain an important sector. To address this investor demand and having secured commitments of €100 million in seed funds, Finland’s United Bankers announced the launch of UB Forest Industry Green Growth (UB FIGG) Fund I LP at the end of January.
The UB FIGG Fund
UB’s latest launch is a closed-end private equity fund for professional investors, with 10-year term and a target size of €300 million. The fund’s target net return (IRR) is over 15%. The first close for the fund was anchored by state-owned Finnish Industry Investment Ltd (Tesi), Finnish pension companies Veritas, Elo, the Pension Fund of the Finnish Broadcasting Company and Sandvik Pension Fund.
The UB FIGG fund will invest in sustainable and resource-efficient forest and bio-based industries and in companies focused on plastic and other fossil fuel-based material replacements, higher value and more efficient use of wood and agricultural raw material side streams and greater use of these raw materials across a wide range of intermediate and end-use. UB’s original announcement further adds that “the fund has already developed a solid pipeline of potential initial investments, with the first investments expected to be made in early 2023.”
Image courtesy of United Bankers
“The fund can invest in any non-listed company which is processing further the forest or agri raw material and adding value to it. The investment scope’s universe is, therefore, very diverse as the end-uses of such products are numerous. A potential portfolio company needs to be far enough in terms of the so-called technical readiness level (TRL). The minimum TRL is 6-71. To give an example, a manufacturing company has to have conducted a successful pilot before we can consider an investment. We can also invest in more mature companies as long as there is a strong growth element involved. It is also vital that these companies already have commercial traction, i.e. adequate market acceptance and are already in a growth phase, towards scaling up to an industrial level. There are a wide range of companies within the forest industry cluster including companies which e.g. add value to the existing industry side streams or have developed a new technology utilising wood-based materials and replacing fossil-based materials. We can invest globally, but the focus is in the Nordics and in Europe,” Matti Lehtipuu, Chief Portfolio Manager of the UB FIGG fund, shares with NordSIP.
Investment Value Beyond Cash
UB FIGG is a signatory of Operating Principles for Impact Management and reports on the environmental and climate impact of its investments. As an investor committed to impact, UB is in a position to provide its investee companies with more than just capital.
“Our fund will take an active role as an investor. We will always require a board seat. Within our team and the advisory board, we have over 300 years of combined forest and bioproduct industry experience from similar companies. We strongly believe our active role and ownership will drive growth and value,” Lehtipuu explains.
According to Lehtipuu, the fund’s business development areas include best industrial practices in operations, market positioning and sales development, raw material strategy, organic international expansion and growth strategy. The fund can also help its investee companies with capital structure optimisation, active ESG development, financial management and reporting, best talent attraction and retainment, and investor and other key stakeholder relations. Last but not least, the firm will help companies improve corporate governance and board participation, develop towards exit / IPO readiness, and research and development.
1. A technical readiness level or TRN is a method for estimating the maturity of technologies during the acquisition phase of a program (originally developed by NASA and then modified and adopted by the European Union). The scale ranges from 1 to 9, where, according to the EU model, 1 corresponds to ‘Basic principles observed’ and 9 corresponds to ‘Actual system proven in operational environment’. The levels 6 corresponds to ‘Technology demonstrated in relevant environment’ and 7 to ‘System prototype demonstration in operational environment’. [Source] ↩
