LGPS Fund Broadens Forestry Holdings
UK Local Government Pension Fund Invests £80m in Forestry Strategy
The South Yorkshire Pensions Authority (SYPA) has committed £80m to a forestry strategy, marking a significant move towards climate mitigation and net zero commitments. The investment, which is part of SYPA's £11.1bn fund, is a testament to the growing interest in natural capital strategies, including forestry.
SYPA has given a mandate to Campbell Global, part of J.P. Morgan Asset Management, for this forestry strategy. Campbell Global's strategy invests in global forestry assets with a focus on carbon sequestration and the generation of instruments for the reduction or removal of greenhouse gases.
Meanwhile, SYPA is not the only entity making moves in this direction. Gresham House, another player in the forestry investment scene, has already allocated £50m to a forestry fund. Gresham House has undertaken acquisitions in Scotland and Wales, signifying a growing interest in UK forestry investments.
The return profile of natural capital strategies, including forestry, is a topic of debate among investors. While there is strong enthusiasm and record fundraising in natural capital, including forestry-focused funds, some debate remains about financial returns versus impact outcomes.
The first half of 2025 saw natural capital fundraising, especially in agri-food and forestry, hit a record £7.9 billion, driven by investors attracted to climate alignment, uncorrelated financial returns, and inflation protection. Large institutional investors are also allocating significant portions (30%+) of portfolios to sustainability and climate-related assets, suggesting confidence in returns linked to climate action.
However, the complexity of valuing nature-based assets means tools and frameworks, such as natural capital accounting, are still evolving. Initiatives like the International Sustainable Forestry Coalition’s project and the Natural Capital Investment Alliance aim to create consistent frameworks to value ecosystem services and nature-related financial disclosures, reflecting ongoing efforts to better quantify risks and returns in forestry and natural capital investments.
Investors see natural capital investment as a strategic imperative for resilience and prosperity, beyond pure conservation, which broadens the investment appeal but also complicates return expectations. Despite this, the trend points towards growing confidence but also ongoing standardization efforts to align financial returns with climate and nature impact in forestry investments.
In conclusion, the UK local government pension fund's investment in a forestry strategy is a significant step towards climate mitigation and net zero commitments. While some divergence exists regarding the precise financial return profiles due to evolving measurement and disclosure practices, the trend points towards growing confidence but also ongoing standardization efforts to align financial returns with climate and nature impact in forestry investments.
- The investment in a forestry strategy by the South Yorkshire Pensions Authority (SYPA) aligns with the growing interest in environmental-science-related investments, such as those that focus on climate-change mitigation and carbon sequestration.
- The UK local government pension fund's forestry strategy investment is a part of a larger trend where investors, including institutional ones, are increasing their involvement in finance and investing related to environmental science, particularly in the realm of climate-change and natural capital.
