Top 50 natural capital investors

For the first time, IPE Real Assets has compiled the Top 50 institutional investors in natural capital real assets, encompassing timberland, forestry, farmland, agriculture and other land-based investments. The ranking is exclusively for capital owners, predominantly pension funds.

It was based on an IPE Research survey and publicly available information, predominantly in the form of annual reports. Where accurate numbers were not available, estimates have been made. Some investors have not been included because of a lack of information.

More than 50% of the ranking is represented by North American investors, which is not surprising given that US public pension plans have a fairly long history of investing in timberland and farmland, while most of the large Canadian pension funds have built up exposure as part of their long-standing direct private-markets programmes. US and Canadian funds dominate the top 10, with only the Netherlands ABP and Germany’s BVK featuring here.

The largest investor is Canada’s Public Sector Pension Investment Board (PSP Investments) with €8.35bn in assets. Once you get to position 22 in the ranking (Florida State Board of Investments), total assets start to fall under the €1bn mark. The second half of the table could see changes next year and beyond as more institutional investors enter the asset class.

At the beginning of the year, ACCESS Pool, which manages £35bn (€40.6bn) of assets on behalf of the UK local government pension scheme (LGPS), put out a search for investment managers to invest in timberland. The organisation is looking for one or more “core” and “impact” global timberland investment managers. The initial mandate size is expected to be approximately £300m, “with potential to grow thereafter”.

“We’ve been exploring ways to include natural capital investments into our portfolio… Timberland ticks all of these boxes”

Stephen O’Neill

The search follows news last year that UK pension fund Nest is on the hunt for timberland managers as part of its plan to invest in natural capital. Stephen O’Neill, head of private markets at Nest, said at the time: “We’ve been exploring ways to include natural capital investments into our portfolio as we continue to diversify our private markets allocation, take advantage of complex and scarce investment opportunities, and to decarbonise as we move closer to net-zero targets. Timberland ticks all of these boxes.”

He added: “The performance of timberland speaks for itself. It offered stable total returns underpinned by strong cash yields and should play a complementary role in our portfolio alongside our other illiquid investments.”

Top 50 Natural Capital investors

Towards the end of last year, two European pension funds – Sweden’s AP2 and Germany’s Bayerische Versorgungskammer (BVK) – were among the investors to back an Australia and New Zealand ‘landscapes’ and forestry fund launched by New Forests.

ABP is the only European investor to make it into the Top 10, and BVK just missed out, having ranked 11th. BVK has been invested in timberland since 2008 and has built up a €1.7bn portfolio, including funds of funds and separately managed accounts.

ABP is by far the largest Dutch investor in natural capital. It has a growing portfolio of almost €3bn in agriculture (€1.3bn) and forestry (€1.6bn), which it wants to grow to a maximum of €5bn in the next few years. ABP owns, through its asset manager APG, forests in Chile, New Zealand and Tasmania. While ABP is increasing its investments in natural capital, the Netherland’s second-largest pension fund is doing the opposite. PFZW has a legacy portfolio with forestry and agriculture investments, and about 10 years ago it decided to stop making new investments and slowly phase out the asset class.

ABP was involved in one of the largest transactions last year, joining up with the UK’s Pension Protection Fund and Australia’s UniSuper to acquire a 170,000-hectare plantation forestry estate in Tasmania for more than A$1bn. The three investors bought the plantation from a fund managed by New Forests, in which PPF and ABP were investors. The Tasmanian forestry estate is one of Australia’s largest plantation of hardwood estates by productive area and consists of vertically integrated assets and operations, spanning approximately 90,000 hectares of productive plantation forest.

Australian superannuation fund UniSuper, which was involved in the transaction, is the largest Australian investor in the ranking. The fund first moved into forestry in the early 2000s. 

Only four of the top 50 investors are from Australia. The four Australian investors in the ranking are superannuation funds UniSuper, Aware Super and Rest, and sovereign wealth fund Future Fund. Future Fund began investing in timberland in 2010 and the asset class is part of its ‘tangible assets’ programme.

The largest constituent from Asia-Pacific is the New Zealand Superannuation Fund, which owns about €1.81bn in natural capital assets.

As we explore in this section, much of the institutional capital going into Australian natural capital markets comes from offshore investors, rather than the country’s large domestic superannuation schemes. In November, Alberta Investment Management Corporation (AIMCo) and New Agriculture teamed up to buy a cattle-breeding business in the Kimberley region of Western Australia understood to be worth around A$300m.

Last year, another Canadian institutional investor, CDPQ, launched a sustainable agricultural platform in Australia with the Clean Energy Finance Corporation, investing A$150m in Wilga Farming and acquiring a minority stake in agriculture manager Gunn Agri Partners.