Institutional Demand for Natural Capital
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"Institutional nature-capital allocation has grown five-fold in a decade, but the real story is diversification: pension funds now back ecological restoration, and billion-dollar funds blend timber revenue with conservation. Scale, governance and credible reporting increasingly separate favoured assets from the rest."
Private capital is directing increasing attention towards nature-based investments, including forestry, restoration, sustainable agriculture and water resilience. Private investment in nature projects reached approximately USD 14 billion in 2025, with institutional investment activity growing in both deal count and average transaction size. This figure represents a roughly five-fold increase from the USD 2.8 billion recorded a decade earlier, and the growth in scale is arguably less significant than the shift in composition beneath it. Where sustainable agriculture accounted for 68% of nature-based allocations between 2016 and 2020, that share fell to 36% by 2024 to 2025, not because agriculture contracted, but because entirely new categories of nature investment emerged and expanded faster around it.
This diversification is visible in the scale institutional capital is now willing to commit. In April 2026, BTG Pactual's Timberland Investment Group closed a USD 1.24 billion fund focused on Latin American restoration, an uncommonly large vehicle for this asset class. Notably, only half the land will be planted for commercial harvesting; the remaining 133,500 hectares in Brazil's biodiversity-rich Cerrado region is allocated to native-species reforestation and protection, funded through a blend of catalytic capital, Forest Stewardship Council-certified timber revenue, and carbon and ecosystem-service income. Latin America has attracted 28% of global nature capital deployment over the past decade, underscoring how specific regions with credible land tenure and certification infrastructure are absorbing disproportionate institutional interest.
A parallel signal comes from ecological restoration in the United States, where a single 2016 pension commitment of USD 30 million has since grown to at least ten pension funds engaged across five restoration funds. This matters because pension capital is not impact-motivated; its presence indicates that ecological restoration, backed by clear regulatory frameworks such as US Clean Water Act mitigation credits, has become what the sector describes as a "boring," meaning genuinely safe and predictable, institutional asset class. Whether comparable regulatory clarity, such as the UK's biodiversity net gain system, can replicate this pattern outside the US remains an open question worth monitoring closely.
This does not mean all forestry assets will benefit equally. Institutional capital typically favours assets with clear governance, established management, credible reporting, scalable operations and transparent paths to monetisation. The data supports this directly: institutional deal counts have tripled over the past decade, and average ticket sizes have grown from USD 70 million in 2017 to USD 167 million in 2025, reflecting a preference for larger, more professionally structured opportunities capable of absorbing meaningful capital efficiently. Smaller, less formally governed forestry assets, however ecologically valuable, are simply less able to meet the scale and reporting standards this capital increasingly requires.
Carbon-linked nature investment illustrates the sector's continued sensitivity to policy timing. Carbon-business allocations fluctuated from 4% of nature investment before 2020 to 15% during 2021's peak before settling back to around 6% today, even as deal count grew steadily from seven transactions in 2016 to 41 in 2025. Demand visibility is improving, with the Carbon Offsetting and Reduction Scheme for International Aviation entering its mandatory phase in 2027 and Science Based Targets Initiative signatories required to purchase credits from 2035, yet the supply pipeline of high-quality, verifiable credits remains comparatively thin relative to this anticipated demand.
For clients assessing forestry and natural-capital exposure, the practical takeaway is that institutional appetite is real and growing, covering at least 105 million hectares globally with a further USD 183.5 billion slated for allocation by 2028, but it remains concentrated in specific asset structures, geographies and governance standards. Defoes helps clients understand where this institutional capital is actually flowing and what governance, reporting and scale characteristics distinguish the forestry assets attracting it from those still waiting to meet that threshold.
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