UK’s first public-private nature fund raises $86m to restore landscapes at scale

Public funding alone can’t fill the financing gap for long-term nature restoration projects that mitigate the impacts of climate change, says environmental fund manager Finance Earth.

The London, UK-based firm drove that point home earlier this month when it announced a £64.6 million ($86.4 million) first close of its Big Nature Impact Fund LP, which blends anchor capital from the UK government’s Department for Environment, Food and Rural Affairs (Defra) with backing from institutional investors.

Part of the UK Nature Impact Fund platform, the Big Nature Impact Fund is the UK’s largest-ever nature-as-infrastructure fund, and the first to combine public and institutional investment for nature restoration projects.

Defra provided a £30 million ($40 million) cornerstone investment, while the remaining capital came from Zurich Insurance Group, Admiral Group, Esmée Fairbairn Foundation, and the Church of England’s Social Impact Investment Programme.

The fund is targeting a final raise of £90–120 million ($120–$160 million).

Defra unlocking private finance ‘at scale’

The fund’s structure could provide a blueprint in future for others, suggests Finance Earth investment director Rich Fitton.

The Defra contribution, in particular, could help de-risk investment into nature projects for more commercial backers.

Defra’s capital sits at the bottom of the fund’s cashflow waterfall, absorbing first losses and only seeing returns once the private investors have recovered their capital in addition to a 7% preferred return.

For every £1 of public money, the structure is designed to unlock at least £2 of private investment.

“Structuring Defra’s capital as downside protection was fundamental to unlocking private finance at scale into what remains a relatively new asset class,” Fitton told AgFunderNews.

Taking a cue from renewables

Rather than acquiring land outright, the 12-year fund will partner with landowners and project developers, funding woodland creation, peatland restoration, and habitat projects across England. Revenues will come primarily from verified carbon credits and biodiversity units sold under offtake agreements, rather than from timber, farming, or land price appreciation.

Describing the model as “nature as infrastructure” helps lower the psychological barrier for institutional investors unfamiliar with natural capital, explains Fitton.

“We design the funds to make it look and feel and smell as much like a traditional infrastructure fund as possible, because the underlying investments do look a lot and live like infrastructure investment.”

Both share high upfront capital expenditure, multi-decade revenue streams, and a clear path from development through to the operational phase.

“We see the natural capital sector as following in the footsteps of those more established sectors,” explains Fitton. “This is a familiar structure of investment but in a new asset class: nature.”

The exit strategy borrows directly from renewable energy and what happened as solar and wind energy matured as asset classes. Finance Earth is targeting a five-year mark as a key inflection point when woodland and peatland projects typically hit their first carbon credit verification event.

At that point, the assets should become attractive to the so-called “YieldCo” funds that buy stabilized, operational assets and take on only market risk, not construction or development risk.

The fund will invest only in fully verified credits, sidestepping the more common practice of selling pre-verification carbon credits in UK voluntary markets. It is also one of the first funds to receive the Financial Conduct Authority’s new “Sustainability Impact” label.

Beyond England

Fitton acknowledges the challenges ahead. Natural capital remains a “loose term” covering everything from commercial timber to biodiversity credits, and the markets underpinning the fund’s revenues are still nascent. The fund is betting that high-integrity projects, particularly mixed native woodland rather than monoculture commercial forestry, will command a price premium as buyers become more discerning.

With its first close complete, Finance Earth is now deploying capital against an identified pipeline of over £100 million in projects.

Its ambitions also stretch beyond England, with future funds planned for Scotland, Wales, and Northern Ireland. These and other projects could lay groundwork for replicating the blended finance model in other jurisdictions where a public or philanthropic anchor investor is willing to absorb first-loss risk.

This week also saw the UK arm of investment firm Capital Continuum Advisers merge into Finance Earth to create what the company says is “one of the world’s leading specialized platforms for climate and nature investment.”

CCA UK brings its carbon and nature project structuring expertise into Finance Earth’s fund management capabilities, and the latter will take on CCA UK’s pipeline of carbon projects in Africa and Southeast Asia.

“This is a useful model that can be replicated elsewhere,” Fitton says. “Watch this space.”