How can a green loan help to rebuild North America’s forests?

PRT Growing Services grows trees. Lots of trees. Over its 30-year history, the company has delivered 4.5 billion seedlings¹ to help governments and timber producers replant forested areas. It has branched out from its home on Vancouver Island to become the largest producer of container-grown forest seedlings in North America², operating a network of 21 growing and cold storage facilities in the US and Canada.

At a time when the world is ramping up reforestation efforts, companies like PRT are an essential link in the sustainability chain, serving on the front line in the fight against climate change.

They can also be attractive investment opportunities.

Enter Instar Asset Management, a Toronto-based private equity firm investing in niche, middle-market businesses that deliver essential products and solutions across North America. Instar spotted the value in PRT, acquiring the company in 2021 and investing in its future with enhanced operations and a plan for growth.

“Improving the resilience of our forests has never been more important,” said Gregory J. Smith, President and Chief Executive Officer, Instar Asset Management. “We are excited to partner with PRT as we expand the company’s reach and bring a positive environmental impact to more communities.”

Sustainable forestry is a core component of the global push to reduce carbon emissions and combat the effects of climate change. If deforestation continues at its current rate, the impact on the environment will soon become irreversible as temperatures rise and more forest land is degraded. Even the Amazon basin now emits more CO2 than it absorbs, a group of Brazilian scientists found this year.

Reforestation, on the other hand, can reverse some of the damage and improve the outlook for the forestry industry, by creating more opportunities for sustainable cultivation and safeguarding jobs. 

Globally, the World Economic Forum is promoting a campaign to conserve, restore and grow 1 trillion trees by 2030 by emphasising the need to protect the world’s natural ecosystems and the power of nature-based solutions in the fight against climate change.

Initiatives like these are raising awareness in the private sector of the need to invest in biodiversity, and the potential of nature-based investments.

“Instar is at the forefront of the industry in terms of their commitment to sustainable finance. Leveraging sustainable financing options is becoming an increasingly important focus for private equity firms, both at the portfolio company and firm level” said Madelaine Banks, Head of Leveraged Finance, HSBC Bank Canada.

In 2021, HSBC stepped forward as Green Loan Coordinator on a C$90 million Green Loan to support Instar’s acquisition and PRT’s future growth, taking responsibility for ensuring that operations complied with global market standards. In 2023, HSBC acted as Co-Coordinator on a new US$30M Green Loan to assist PRT in their acquisition of IFCO Seedlings which operates in the same industry, helping to further strengthen their position as a premium-quality seedling products and services provider.

IFCO Seedlings, owned and operated by the Patrick Mobley family since 2004, owns five bareroot and six container nurseries located strategically across six states in the Southeastern U.S. The company also operates and maintains seed orchards in seven states.

“Reforestation is an important tool to combat climate change and support biodiversity in key ecosystems” said Angie Lamarsh, Head of Sustainable Finance, Commercial Banking, at HSBC Bank Canada. “HSBC is proud to support PRT with green financing as they continue to expand the impact of their business across North America.”