2026 has so far been described as the year that natural capital “comes of age”. According to IPE Real Assets’ recent natural capital feature issue, the 50 largest institutional investors globally have now deployed nearly €80 billion into natural capital investments, representing a year-on-year increase of close to 6% from 2025.
A Schroders and Room151 survey also found that many LGPS funds are targeting allocations between 1% and 5% of their portfolios to natural capital, suggesting the £350 billion UK LGPS sector could deploy multiple billions into this asset class in the near term. But where and how could this potential capital be deployed?
Forestry and timberland investments generate returns through biological growth and land appreciation, offering diversification and inflation protection through timber harvests. The US dominates globally with the most liquid market, while Latin America offers faster biological rotations but can carry currency and political risks, the Nordics offer the most institutional access in Europe, and New Zealand has a developed institutional market. Gresham House is the main UK operator with Foresight Group also offering an afforestration-focused strategy, with global reach through firms like Manulife, BTG Pactual, New Forests, and Campbell Global.
Agricultural and farmland investments generate returns through crop yields, land appreciation, and lease payments, offering inflation hedging and exposure to global food demand. The US is the largest market with transparent pricing, Eastern Europe offers lower-priced assets, the Mediterranean has a growing market in fruits, almonds, and other nuts, and New Zealand has a pastoral focus. MetLife, Nuveen, and PGIM are the largest global managers in traditional agriculture, with managers like Savills and Regenerate offering access to regenerative agriculture practices in the UK and Europe, including cover crops, low-tillage farming, diverse crop rotations, and livestock integration that restore ecosystem health.
Biodiversity and carbon markets, conservation, ecosystem restoration, and rewilding protect or restore natural ecosystems such as wetlands, mangroves, peatlands, generating returns through biodiversity and carbon credits, payments for ecosystem services, and ecotourism. They address climate mitigation and adaptation whilst providing co-benefits using nature-based solutions for flood protection and water filtration, though returns require long-term horizons and patient capital. The UK market is active in peatland restoration and biodiversity net gain, whilst global voluntary carbon markets are constantly evolving. Asset managers like Aviva Investors and Climate Asset Management operate in this space, whilst the UK is also home to businesses like Great Yellow, Nattergal, Oxygen Conservation, Rebalance Earth, and RESTORE, all looking at various parts of this dynamic and innovative sector.
Historically, UK asset owners have first entered natural capital via global farmland or forestry strategies. However, UK government policy, particularly regulatory momentum in the pensions market, is increasingly encouraging domestic focus. As the UK market slowly matures and track records accumulate, this shift may accelerate in the coming years. Questions around scale, returns, and portfolio integration remain live, but managers are often willing to help shape education and understanding for the development of the asset class.
For asset owners willing to move beyond rhetoric into deployment, natural capital in the UK represents perhaps not a coming of age, but a coming home. Capital restored to its fundamental purpose of sustaining the communities it ultimately serves.
