By Gerelyn Terzo, Global AgInvesting Media
Natural capital is rising as an asset class du jour in institutional portfolios, with U.K. investors spearheading its shift from a niche allocation to core holding, according to a new study unveiled by mallowstreet. The 2026 Natural Capital Report, developed in collaboration with BNP Paribas Asset Management, Foresight Group and Rebalance Earth, highlights that institutional investors have made the leap from debating natural capital allocations to now searching for opportunities to scale their exposure to this burgeoning market.
The analysis reflects the views of several dozen U.K. institutional investors overseeing more than £3 trillion in assets, spanning local government pension schemes, defined benefit and defined contribution plans, as well as insurers and charities. Taken together, the findings point to a market that has moved beyond its early stages, with growing demand among investment officers to commit capital and deepen exposure in the years ahead.
Nearly 40 percent of U.K. institutional investors still on the sidelines are eyeing an inaugural natural capital investment within the next five years, while those already in the market are preparing to boost exposure. For now, however, natural capital remains a relatively small line item in most portfolios. Allocations are modest, with more than half of defined benefit pension schemes and charitable investors holding no exposure or allocations below 1 percent. Nevertheless, as the report notes, “modest allocations” combined can translate to “critical mass.”
Local government pension schemes and insurers are further along, with 76 percent and 70 percent, respectively, already invested, though allocations typically remain limited. Defined contribution pension schemes stand out by comparison, with just over one-third sidelined today, while a quarter already possess allocations in the 1 percent to 2 percent range with intent to scale over time.
Looking out to 2030, natural capital is expected to be more widely embedded across institutional portfolios. Nearly all local government pension scheme respondents anticipate holding an allocation by the end of the decade, alongside three-quarters of defined contribution pension schemes and insurance providers. More than half of defined benefit pension schemes, as well as roughly half of charitable investors, also expect to allocate, pointing to broad-based adoption across the institutional landscape.
This uptick in interest is rooted in a deepening recognition of natural capital’s role in wider climate goals. Close to 60 percent of U.K. institutional investors believe that safeguarding nature goes hand in hand with combating climate change, setting the stage for even greater expansion. The real wildcard, though, is the pace at which that shared belief turns into actual dollars deployed.
Rebalance Earth CEO and Co-Founder Rob Gardner stated, “For years, natural capital sat in the ‘impact’ box. That framing is shifting toward portfolio resilience. Flooding, water stress and ecosystem failure are no longer theoretical risks; they are already affecting balance sheets, asset values and supply chains. Natural capital is increasingly being assessed as infrastructure, with a focus on cash flow, resilience and risk reduction. In practice, this means that a modest allocation can help reduce risk across the rest of the portfolio over the long term.”
As U.K. institutional investors move from intrigue to large-scale deployment, natural capital is transitioning from a niche interest to a core portfolio component. For the global agriculture investment community, growing demand for high-integrity natural capital assets, particularly farmland, regenerative agriculture, forestry, soil carbon and biodiversity projects, is set to drive substantial institutional capital into the sector. Those who can deliver desired climate outcomes alongside competitive returns will be best positioned to capture this expanding opportunity in the years ahead.
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