NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN OR TO THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER TO ISSUE OR SELL, OR ANY SOLICITATION OF ANY OFFER TO SUBSCRIBE OR PURCHASE, ANY INVESTMENTS IN ANY JURISDICTION.

PLEASE SEE THE SECTION ENTITLED "IMPORTANT LEGAL INFORMATION" TOWARDS THE END OF THIS ANNOUNCEMENT.

This announcement is an advertisement for the purposes of the Prospectus Regulation Rules of the UK Financial Conduct Authority ("FCA") and is not a prospectus. This announcement does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to subscribe for or to acquire, any ordinary shares in any jurisdiction, including in or into the United States, Canada, Australia, the Republic of South Africa, Japan or any member state of the European Economic Area. Investors should not subscribe for or purchase any ordinary shares referred to in this announcement except on the basis of information in a prospectus (the "Prospectus") in its final form which may be published by the Company in connection with the proposed admission of its ordinary shares to the London Stock Exchange ("Admission"). A copy of any Prospectus will, following publication, be available for inspection from the Company's registered office and made available for viewing at the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

6 September 2021

FORESIGHT SUSTAINABLE FORESTRY COMPANY PLC

Proposed initial public offering on the London Stock Exchange via an Initial Placing, Offer for Subscription and Intermediaries Offer

Foresight Sustainable Forestry Company PLC (the "Company"), an externally managed investment company that will invest in UK forestry assets,  today announces its intention to undertake an initial public offering ("IPO") on the Main Market of the London Stock Exchange, by way of an initial institutional placing, offer for subscription and intermediaries offer for a target issue of up to 200 million new ordinary shares (the "Ordinary Shares"), in aggregate, at an initial issue price of 100 pence per Ordinary Share (the "Initial Issue").

Company Highlights

The Investment Manager

The Board

The IPO

Richard Davidson, prospective Chairman of Foresight Sustainable Forestry Company PLC, said:

"Foresight Sustainable Forestry Company's Board of Directors is pleased to be able to bring this significant investment opportunity for both institutional and retail investors to the equity capital markets. Forestry provides a compelling investment opportunity, meeting investor requirements on climate, sustainability and ESG issues, inflation protection properties, and portfolio diversification. Over the long term, managing a portfolio of forestry assets is generally low risk, driven by growth in both volume and value as the trees mature.  We expect the significant shortfall in timber in the UK to push up timber prices in the coming years and are delighted to have Richard and Robert to manage the portfolio on behalf of shareholders, overseen by a strong independent Board."

Bernard Fairman, Executive Chairman and Co-Founder of Foresight Group, said:

"For some years now Foresight, as one of a very few significant players in this sector, has been looking to scale up its forestry investments in an appropriate structure for a wide range of investors to participate in and this LSE Main Market listed sustainable forestry company launch represents the next development in that journey. Forestry is a real asset, and a natural and growing store of value, independent of the economic cycle and if ever there was a time for the world to embrace investment into more trees, this is it.  In the UK, we import the vast majority of our sawn timber requirement, a situation which is not sustainable. The UK and global economies are re-opening and demand for timber is pushing significantly ahead of supply. There is an enormous drive for us all to use more sustainable building and other products. With international recognition that sustainable forestry and afforestation can play a vital role in combatting climate change through net C02 emissions reductions, we truly believe that this is very much a fund of its time."

Foresight Group

Foresight Group was founded in 1984 and is a sustainable, diversified asset manager.  With a long-established focus on ESG and sustainability-led strategies, it aims to provide attractive returns to its institutional and private investors from hard-to-access private markets.  Foresight Group manages over 350 infrastructure assets (accounting for 90% of Foresight Group's AUM) with a focus on solar and onshore wind assets, bioenergy and waste, as well as renewable energy enabling projects, energy efficiency management solutions, social and core infrastructure projects, and sustainable forestry assets.  Its private equity team manages regionally focused investment funds across the UK, supporting 125 SMEs at the end of June 2021.  Foresight Group operates from 12 offices across the UK, Europe and Australia with an AUM at end of June 2021 of £7.8 billion. Foresight Group has a strong track record of managing listed investment companies and is currently the manager to two such entities, Foresight Solar Fund Limited and JLEN Environmental Assets Group Limited, with combined assets under management as at 30 June 2021 of £1.1 billion. 

Forestry: Investment Opportunity Highlights

Investors and companies are currently facing an inflection point, with calls for action on climate change becoming more urgent by the day, sustainability and ESG considerations further gaining in importance, and the risk of inflation increasing through deglobalisation, supply chain bottlenecks, and monetary response to COVID-19. In addition, 2020 saw the highest correlation across asset classes and geographies in two decades[1], introducing higher volatility into investment portfolios.

Forestry provides a unique investment opportunity, meeting investor requirements on climate, sustainability and ESG issues, inflation protection properties, and portfolio diversification. Forestry is a real asset and a natural and growing store of value, independent of the economic cycle.  The Company's returns are expected to be more than CPI + 5% per annum on a rolling five-year basis, based on the NAV once substantially invested. The returns are created by the capital appreciation of the underlying asset freeholds and cash yield, which is generated by the sale of timber from the harvesting of mature forest compartments, the value of carbon units, opportunistic leases to renewable energy developers and ecotourism.

Why UK Forestry?

Why Now?

Why Foresight?

Inflation hedge

Recently bond yields have risen significantly, with the UK's breakeven yield more than a percentage point ahead of the US, implying strong anticipation of 'expected' inflation in the UK.  UK money supply has grown by 12% from £2.5 trillion to £2.8 trillion in the year to February 2021, whilst the UK's real GDP fell by 1.6% in Q1-2021 and is 8.8% lower than pre-pandemic levels[6]^,[7],[8]. In economic theory, increasing the money supply faster than real output causes inflation as the growing pool of capital acquires goods/services that are not supplied at the same rate, putting upwards pressure on prices.

UK commercial timber prices have historically outstripped inflation, offering an inflation hedge during current times of unprecedented monetary and fiscal policy.

Returns and diversification

UK forestry investment returns were impressive over the decade to the end of 2017, with annualised returns of 11.6%, 13.6% and 15.7% across 3, 5 and 10 year periods[9]. Strong performance in UK forestry assets for the period 2017 to 2020 has also been experienced, with compound annual growth in asset values of 16.9% during that time frame[10].

Compared with renewable energy, forestry offers attractive, risk-adjusted returns that are uncorrelated to power prices and versus real estate, forestry offers uncorrelated returns. These low correlations are driven by average annual biological tree growth of 3% to 4%, regardless of economic cycles.

Carbon sequestration

The Company estimates that the IPO proceeds will directly enable c.4 million tonnes of carbon sequestration from the atmosphere from new afforestation planting to support the fight against climate change[11]. For each tonne of carbon sequestered (net of the buffer), a carbon unit is expected to be generated in accordance with the Woodland Carbon Code ("WCC"). Foresight expects to execute a strategy for WCC units that generates maximum sustainability credentials and value for Company shareholders. Future fundraising by the Company after the IPO proceeds are deployed has the potential to enable material further carbon sequestration via additional afforestation.

ESG benefits

In addition to the contribution to the fight against climate change, properly planned and managed commercial forest properties offer other ESG benefits[12]:

Additionally, proper active management of forestry enables recognition by the Forest Stewardship Council ("FSC") and Programme for the Endorsement of Forest Certification ("PEFC"). FSC certification indicates compliance with the highest social and environmental standards on the market. PEFC is an international, non-profit, non-governmental organisation which promotes sustainable forest management through independent third-party certification. Both certification programmes aim to protect forests and ensure the timber is responsibly sourced.

The Company expects to achieve and will aim to exceed the requirements of compliance with the EU Green Taxonomy and Article 9 of the Sustainable Finance Disclosure Regulation ("SFDR").

The Company will directly contribute to five of the United Nations Sustainable Development Goals ("SDGs"):

Goal 3 (Health, Wellbeing); Goal 6 (Clean Water, Sanitation); Goal 12 (Responsible consumption/production); Goal 13 (Climate Action) and Goal 15 (Life on Land).

The Company is expected to qualify for the London Stock Exchange's Green Economy Mark at Admission, which recognises companies that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy. The underlying methodology incorporates the Green Revenues data model developed by FTSE Russell, which helps investors understand the global industrial transition to a green and low carbon economy with consistent, transparent data and indexes.

Foresight Group will apply its Sustainable Investment Criteria when making investments and in the period of management following investment to ensure that these (and the carbon sequestration) characteristics and attributes within the Company's forestry portfolio are maximised.  In addition, Foresight Group, as investment manager will report on its compliance with sustainability and ESG on an annual basis.

The Seed Assets

The Seed Assets currently comprise 34 assets, diversified in age, project type and geography, currently valued at circa £130 million. The Seed Assets extend across c.11,700 hectares (equivalent to c.29,000 acres), with 86 per cent. by area located in Scotland, 9 per cent. in Wales and 5 per cent. in England.

The Seed Assets comprise both existing standing forestry and afforestation. 52 per cent. of the Seed Assets are mature standing forestry assets (extending across c. 6,100 hectares); and 29 per cent. of the Seed Assets are afforestation projects, that will be planted (extending across c. 3,450 hectares). The remaining 19 per cent. being mixed assets that contain some existing forestry co-located with afforestation projects (extending c. 2,150 hectares).  The age profile of the Seed Assets is diversified, including compartments that are being actively felled and a significant amount of unplanted afforestation land. Once all assets are accounted for, the weighted average age of the Seed Forestry Assets is 15 years.

There are over 80 hectares of Sites of Special Scientific Interest designated land in the Seed Assets, most of which is designated as ancient woodland. It is the intention of the Company that this will be retained and treated in accordance with its designation. There are also multiple cases of assets containing Special Areas of Conservation, relating to waterways bisecting or bordering an asset. These include protected habitats for otters and Atlantic salmon and will again be treated in accordance with its designation by the Company. In all cases, the Company will explore methods and activities that will not only preserve but enhance designated areas, through an active asset management approach. The company will explore partnerships with market leading ecological and bio-diversity specialists to support enhancement activities.

All planted assets contain at least the Forestry Commission's necessary amount (1 per cent.) of Long-Term Retention and Natural Reserves stands. All assets are managed to PEFC and FSC standards and are expected to qualify for certification by both standards. For existing forestry acquisitions, it is anticipated that this will be gained within 12 months of acquisition. For afforestation acquisitions, this will be gained as soon after planting as possible.

The Seed Assets are planted with a variety of species. More than 10 commercial species are used across the sites, and a wide variety of natural broadleaves are selected in each case, dependent on which species best suit the landscape.

Investment pipeline

Foresight Group has identified a number of specific opportunities in line with the Company's investment policy which are either, (i) under active discussion with the relevant counterparties, or (ii) likely to be available for sale within the 12 months following Initial Admission. This pipeline represents a total potential investment volume for the Company of £125 million.

As such, with the Seed Assets and investment pipeline, it is anticipated that the full maximum proceeds raised at IPO would be deployed well within 12 months.

Launch timing

The Prospectus for the proposed IPO is due to be released in October 2021 and the close of the Initial Issue is expected to take place in November 2021.

For further information, please contact:

IMPORTANT LEGAL INFORMATION

This announcement is a financial promotion and is not intended to be investment advice. This announcement does not constitute, and may not be construed as, an offer to sell or an invitation to purchase investments of any description or a recommendation regarding the issue or the provision of investment advice by any party. No information set out in this announcement is intended to form the basis of any contract of sale, investment decision or any decision to purchase shares in the Company.

This announcement which has been prepared by, and is the sole responsibility of, Foresight Group LLP, has been approved for the purposes of section 21 of the Financial Services and Markets Act 2000 by Foresight Group LLP, which is authorised and regulated by the FCA.

The target returns and dividends set out in this announcement are targets only and are not profit forecasts. There can be no assurance that these targets can or will be met and they should not be seen as an indication of the Company's expected or actual results or returns. The Company's ability to distribute dividends will be determined by the existence of sufficient distributable reserves, legislative requirements and available cash reserves. Accordingly, investors should not place any reliance on these targets in deciding whether to invest in Ordinary Shares or assume that the Company will make any distributions at all.

The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The material contained in this announcement is given as at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, any proposals referred to herein are subject to revision and amendment.

Recipients of this announcement who are considering acquiring Ordinary Shares following publication of the Prospectus are reminded that any such acquisition must be made only on the basis of the information contained in the Prospectus which may be different from the information contained in this announcement. A subscription for Ordinary Shares is subject to specific legal or regulatory restrictions in certain jurisdictions. Persons distributing this announcement must satisfy themselves that it is lawful to do so. The Company assumes no responsibility in the event that there is a violation by any person of such restrictions.

The Company may decide not to go ahead with the possible Initial Issue and there is therefore no guarantee that a Prospectus will be published, the Initial Issue will be made, or Admission will occur. Potential investors should not base their financial decision on this announcement. Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making investments should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning a possible offer. The value of shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of a possible offer for the person concerned.

This announcement may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. The securities mentioned herein have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "US Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and, subject to limited exceptions, will not be offered, sold, exercised, resold, transferred or delivered, directly or indirectly, in or into the United States or to, or for the account or benefit of, any US person (as defined under Regulation S under the US Securities Act). The Company has not been, and will not be, registered under the U.S. Investment Company Act of 1940, as amended. No public offering of securities is being made in the United States.

Neither this announcement nor any copy of it may be taken or transmitted into or distributed in any member state of the European Economic Area, Canada, Australia, Japan or the Republic of South Africa or to any resident thereof. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this announcement in other jurisdictions may be restricted by law and the persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions.

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements relate to matters that are not historical facts regarding the Company's investment strategy, financing strategies, investment performance, results of operations, financial condition, prospects and the dividend policies of the Company and the investments in which it will invest. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward- looking statements. These factors include, but are not limited to, changes in general market conditions, legislative or regulatory changes, changes in taxation regimes or development planning regimes, the Company's ability to invest its cash in suitable investments on a timely basis and the availability and cost of capital for future investments.

Jefferies International Limited ("Jefferies") is authorised and regulated by the FCA and is acting exclusively for the Company and for no one else in connection with the possible Initial Issue and will not be responsible to anyone (whether or not a recipient of this announcement) other than the Company for providing the protections afforded to clients of Jefferies or for affording advice in relation to the possible Initial Issue, the contents of this announcement or any matters referred to herein. This does not exclude any responsibility which Jefferies may have under FSMA or the regulatory regime established thereunder.

Apart from the liabilities and responsibilities (if any) which may be imposed on Jefferies by FSMA or the regulatory regime established thereunder, Jefferies makes no representations, express or implied, nor accepts any responsibility whatsoever for the contents of this announcement nor for any other statement made or purported to be made by Jefferies or on its behalf in connection with the Company, the Ordinary Shares, the possible Initial Issue or Admission. Jefferies and its affiliates accordingly disclaim all and any liability (save for any statutory liability) whether arising in tort or contract or otherwise which it or they might otherwise have in respect of this announcement or any such statement.

Subject to their respective legal and regulatory obligations (including under the Prospectus Regulation Rules), the Company, Foresight Group and Jefferies expressly disclaim any obligations or undertaking to update or revise any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based unless required to do so by law or any appropriate regulatory authority, including the Financial Services and Markets Act 2000 ("FSMA"), the listing rules made by the FCA under section 73A of FSMA (the "Listing Rules"), the rules and regulations made by the FCA under Part VI of FSMA as amended from time to time (the "Prospectus Regulation Rules"), the disclosure guidance and transparency rules made by the FCA under Part VI of FSMA (the "Disclosure Guidance and Transparency Rules"), the UK version of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended by The Prospectus (Amendment, etc) (EU Exit) Regulations 2019 (the "Prospectus Regulation") and the UK version of on market abuse which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended the Market Abuse Regulation (EU) No. 596/2014 ("MAR").

None of the Company, Foresight Group, Jefferies, or any of their respective affiliates, accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, Foresight Group and Jefferies, and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.