UK asset owners are entering a new phase of ESG-aligned investing, with a growing shift toward nature-positive strategies that support a broader carbon neutral strategy. Once the domain of large institutional investors, sustainable investments in natural capital such as forestry and regenerative agriculture are now increasingly being adopted by smaller defined contribution (DC) schemes and master trusts. 

At the recent Nature Positive Investment Forum, Drew Henley-Lock of Lane Clark & Peacock highlighted this transition, noting that UK institutional investors are embracing nature as a formal asset class. Initial adopters like Nest and large defined benefit (DB) funds such as USS and the Pension Protection Fund led the way. Now, smaller pension schemes are joining this second wave, integrating nature-based investments as extensions of their net-zero commitments. 

Despite 65% of UK pension funds having net zero targets, only 17% are familiar with the Taskforce on Nature-related Financial Disclosures (TNFD), reflecting the early stage of nature-based reporting integration. Unlike the mandatory TCFD requirements, TNFD remains voluntary, although regulatory pressure is increasing. 

Railpen, a £35 billion DB fund, has been a frontrunner in nature-positive investing, allocating to natural capital assets like timberland and sustainable agriculture. Senior investment manager Adam Gillet emphasized the importance of investment scale and governance efficiency, particularly for in-house managed funds. 

Josephine Richardson from the Anthropocene Fixed Income Institute advocated for incorporating nature-related risks into fixed income portfolios, suggesting that pricing in sustainability risks can improve returns and influence corporate behavior. She urged institutional investors to use fixed income as a vehicle for meaningful climate and nature impact. 

As the UK strengthens its leadership in sustainable finance, expanding nature-positive investment strategies reflects the broader integration of ESG principles and long-term carbon neutral goals into institutional asset management. 

Source: 

https://www.netzeroinvestor.net/news-and-views/uk-asset-owners-enter-second-wave-of-nature-positive-investing