Investors express differing opinions on the anticipated financial returns of investment approaches centered around natural assets
In a groundbreaking move, the London CIV local government pension pool has launched a natural capital strategy, with four of its partner funds currently backing the initiative. The strategy focuses on diversified exposure to forestry and agriculture, with a goal of generating returns in the high single digits.
Laura Chapman, interim chief sustainability officer for the pool, is prioritizing managers who are serious about sustainability in their natural capital investments. According to Chapman, the strategy is not just about financial returns, but also about contributing towards resilient ecosystems and climate mitigation objectives.
The potential returns for this strategy are derived from a mix of traditional timber revenue, carbon credit monetization, and biodiversity outcomes. Sustainable forestry activities, such as those under Qarlbo Biodiversity’s Nature+ Forest Management Strategy, combine ecological stewardship with biomass production, supporting carbon sequestration and biodiversity outcomes while supplying sustainable timber products.
NbS projects, especially those involving forest conservation and restoration, can provide earlier positive cash flows due to carbon credits issued in early stages. These projects complement timber revenue and carbon market incentives, enhancing early positive cash flows and sustainable income over time.
However, the overall investment in natural capital often requires longer-term horizons and involves innovative financial instruments. Institutional investors increasingly see sustainable timber and natural capital strategies as a way to contribute towards resilient ecosystems and climate mitigation objectives, aligning finance with sustainability impact goals.
Richard Kelly, managing director and co-lead of Foresight Natural Capital, predicts that rising timber prices and growing corporate demand for high-quality carbon credits could enhance the return profile of natural capital investments. Celine Claudon, chief commercial officer at the International Woodland Company, argues that double-digit returns across core markets and strategies are unlikely without major market shifts.
Josh Brewer, responsible investment officer at Oxfordshire County Council Pension Fund, is factoring in returns between 6 and 8 percent for the natural capital asset class. Brewer's fund is proceeding carefully in the early stages of allocating capital to natural capital, emphasizing the importance of integrity and managing potential reputational risks.
London CIV describes carbon credits as "a cherry on the top" rather than a core return driver for its natural capital strategy. The fund is focusing on the integrity of carbon credits, stating that more regulation would be beneficial.
The launch of the London CIV natural capital strategy marks a significant step forward in the UK's approach to nature-positive investing. The strategy is part of a second wave of nature positive investing, with a measured approach and a focus on sustainability.
In a related development, plans for a new 300-metre skyscraper, named the Oakwood Tower, are underway in the City of London, next to St Paul's Cathedral. The Oakwood Tower will use timber as its core construction material to aim for carbon-negative status, further emphasizing the growing demand for sustainably sourced timber.
Global demand for sustainably sourced timber is expected to surge, increasing from 1.5 billion cubic metres in 2012 to as much as 6 billion cubic metres by 2050. The NZI Charities and Endowments Summit was held in London on 12/06/2026, providing a platform for discussions on sustainable timber and natural capital investments.
Chapman emphasizes the importance of choosing the right managers who focus on resilient ecosystems. With the growing demand for sustainable timber and natural capital investments, it is clear that these strategies offer attractive financial returns alongside environmental benefits.
- Laura Chapman, interim chief sustainability officer for the London CIV local government pension pool, believes that the natural capital strategy is not just about financial returns but also about contributing towards resilient ecosystems and climate mitigation objectives.
- In the Home-and-Garden sector, the launch of the Oakwood Tower in the City of London, next to St Paul's Cathedral, showcases the use of timber as its core construction material, aiming for carbon-negative status, further emphasizing the growing demand for sustainably sourced timber.
- Sustainable forestry activities, such as those under Qarlbo Biodiversity’s Nature+ Forest Management Strategy, combine ecological stewardship with biomass production, supporting carbon sequestration and biodiversity outcomes while supplying sustainable timber products, making them attractive investments in the environmental-science sector.
