Defra has supported the launch of the Big Nature Impact Fund to make it easier for large investors to channel private capital into habitat creation, woodland planting and peatland restoration.
This article explains a practical step taken to channel larger pools of capital into nature recovery across England. The Department for Environment, Food & Rural Affairs (Defra) has backed the creation of a dedicated vehicle designed to pool public and private money, reduce investor risk and scale up projects such as habitat creation, woodland planting and peatland restoration.
The aim is to turn interest among institutional investors into tangible on-the-ground action.
As Deputy Director for Nature Markets and Investment, I have seen recurring feedback from the investment community: many want to participate in environmental restoration but encounter practical barriers.
This fund is intended to address those barriers by aggregating capital, smoothing risk and giving investors a clearer route to invest in nature.
Why large investors have held back
Two common obstacles have constrained big investors: a shortage of opportunities of sufficient size and uncertainty around financial returns.
Institutional investors typically look for assets that match their scale and risk-return profile. Projects that are small, fragmented or unproven in terms of revenue streams are rarely appealing. By creating a fund structure that sources and vets projects, Defra aims to present investable propositions that meet institutional standards.
Scale and predictability
The new vehicle targets the need for scale by combining multiple projects into a single investment pool. This aggregation reduces transaction costs and improves the predictability of cash flows. In addition, the fund uses public capital to absorb a greater share of early-stage risk, which makes private returns available earlier in the capital structure and therefore less risky for private investors.
The Big Nature Impact Fund: design and role
Defra has contributed public money and selected a regulated fund manager through a competitive process to design and run the fund. Finance Earth, a mission-oriented asset manager, was chosen to build and operate the vehicle. Their role includes sourcing projects, performing due diligence and raising private capital to meet the fund’s targets.
Investment priorities and standards
Projects supported must align with the government’s Environmental Improvement Plan and deliver both environmental outcomes and a financial return. Early investment themes include habitat creation, woodland planting and peatland restoration. The fund also incorporates reporting requirements so that performance—both financial and environmental—can be tracked and shared with other market participants.
How the capital is stacking up and what comes next
The fund has reached an important early milestone by securing just under £35 million of private commitments from a mix of insurance companies, philanthropic foundations and high-net-worth individuals. Defra’s public commitment of £30 million is structured to take a larger share of the initial risk, which means that more than £17 million of Defra’s funding is immediately available to be deployed into investee projects.
Finance Earth’s target is to grow the fund to between £90 million and £120 million within the next 18 months by attracting further private capital. The fund serves as a gateway: instead of investors conducting their own searches and assessments for individual projects, they can invest through a professionally managed vehicle that brings regulatory oversight and a mission-driven approach.
Learning, transparency and market development
Defra has built in transparency measures so that the market can observe the fund’s performance. These reporting arrangements are intended to create a body of evidence on returns, risks and environmental impact, with the aim of normalising nature investment across the broader financial sector. The hope is that successful demonstration will reduce perceived barriers and encourage more mainstream investment into nature restoration.
Longer-term implications
By leveraging public money to attract private capital, the fund seeks to show how government support can unlock larger-scale private investment into nature. If the fund succeeds, it could catalyse further vehicles and strategies that apply similar structures to other types of nature-based projects or regions. That broader mobilisation of capital would strengthen the green economy and support communities while contributing to national environmental targets.
As Minister for Nature Mary Creagh has remarked, nature is the foundation of our economy, and this initiative represents an opportunity to protect and restore it for future generations. The Big Nature Impact Fund is one example of using public resources strategically to reduce barriers and attract private investors to the work of environmental recovery.
We will continue to monitor the fund’s progress and publish findings so others can learn from its experience. The ultimate goal is to make investment in nature a mainstream, routine part of how capital markets operate, translating investor intent into measurable, long-lasting environmental outcomes.
