Natural Capital

Seeking to generate long-term, attractive financial returns through the preservation and restoration of nature and biodiversity

The natural environment is fundamental to the wellbeing and productivity of society and the economy. At Federated Hermes, the UK Nature Impact Strategy seeks to deliver long-term capital growth by investing into the restoration and conservation of habitats across land, river and sea and into businesses that have a measurable positive impact on the natural environment.

The UK Nature Impact Strategy was designed and is managed in partnership with Finance Earth, a leading environmental and social impact investing advisory firm.

Investing to help restore nature
and mitigate climate change

The pillars of our offering

1. Seeking to generate returns through impact:

We aim to deliver financial returns that are competitive with traditional Private Markets asset classes by investing into assets with measurable, long-term nature, climate and social impacts.

2. Diversified multi-asset exposure:

Our strategy is diversified across nature-based asset classes and markets, seeking to provide investors with access to multiple sources of return that exhibit low correlation with traditional strategies.

3. Institutional capacity and risk management:

Leveraging decades of practical experience across real asset development and Private Markets, we aim to execute investments into natural capital within a traditional commercial risk management framework.

4. A differentiated investment team:

A multi-disciplinary team with over half a century’s collective experience across Private Markets including natural capital, real estate, infrastructure, private equity, venture capital, as well as ESG and impact investment.

5. A market-leading and science-based approach:

Our approach has underpinned the development of the UK’s ‘Nature Markets Principles’, created to establish a market standard and written in collaboration with the UK’s leading conservation charities¹, with whom we have defined ‘what good looks like’.

¹The Wildlife Trusts, RSPB, Woodland Trust, and National Trust.

6. Exposure to high-integrity carbon and biodiversity markets:

Alongside multiple sources of return, our strategy seeks to generate and sell high-quality, verified carbon credits and biodiversity units across multiple UK markets.

7. Access to high quality partners supporting regional growth:

We aim to work with and scale a select number of hand-picked delivery partners to help optimise execution and support related, skilled job creation.

Nature-based solutions are an exciting and developing part of the market for institutional investment, and a crucial part of achieving net zero, which we are embarking on through industry-leading partnerships.

Robert Hall, Director, Natural Capital

Why Federated Hermes Natural Capital?

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Institutional expertise

Federated Hermes Private Markets has considerable experience in long-term land-use change projects and real asset development. Over the years, we have deployed billions of pounds across the UK working with stakeholders across the public and private sector.

As a firm, we combine institutional investment expertise across Private Markets with a commitment to best practice in sustainable and impact investment.

Experienced, multi-disciplinary team

The extensive experience of the Federated Hermes Natural Capital team includes over 40 years of real world, practical experience of delivering both large and small-scale Natural Capital investments and has worked throughout the value chain, from on-the-ground delivery as contractors through to the construction, management and valuation of institutional-scale Natural Capital investment portfolios.

This deep understanding is further complemented by a market-wide network with experience of having worked on some of the earliest carbon projects in the UK, including those that predate the existing market infrastructure.

Innovation through unique partnership

The UK Nature Impact Strategy brings together the institutional investment capabilities and infrastructure of the Federated Hermes Private Markets platform with the origination, structuring, and nature-based advisory expertise of leading environmental investment boutique, Finance Earth.

Born out of a shared vision and complementary expertise, the partnership creates what we believe to be a highly differentiated capability. The UK Nature team has underwritten more than £1bn in UK-based Natural Capital investments and advised over 100 diversified nature-based impact investments. This experience helps the team understand how to manage risk and how to identify opportunities.

Seeking measurable, long-term positive impacts

Investments undergo an extensive impact screening and evaluation process to help ensure we take a holistic view of ecology, landscape, the agricultural system and community resilience and history as we seek to deliver long-term positive climate, nature and social impacts.

Impacts will be independently measured, validated and reported on. We will report the positive impact which our investments have on:

Climate
Nature & Biodiversity
Society and Community

We will work directly with the UK’s leading natural scientists and social scientists in order to ensure that we consistently and systematically pursue best practice and invest on the basis of science.

Selective and differentiated
investment process

Our strategy seeks to invest into established nature markets that are experiencing exponential and resilient growth in demand and, as such, can deliver strong and resilient returns. We focus on pursuing quality investment opportunities that exhibit attractive long-term fundamentals and demand growth, alongside robust, definable downside risk mitigation.

Our differentiated origination approach is underpinned by existing and long-standing relationships with the key stakeholders in UK nature markets.

This access to some of the UK’s largest landowners and cutting-edge science allows us to be well-positioned to source high-quality, institutional-scale opportunities in a market that has, until now, had limited ability to scale.

The geographic focus on the UK further supports risk mitigation: the UK is an emerging leader in nature-based impact investment, hosting some of the highest quality voluntary carbon and nature markets in the world, alongside some of the most experienced land managers and conservationists.

How we invest

We target investments into scalable habitat creation or restoration projects of the highest ecological quality, sourced from a select and carefully chosen number of trusted and experienced counterparties.

We seek to deliver strong and attractive returns through both capital growth and income generation, including but not limited to revenues earned through the delivery and sale of multiple goods and services, including “ecosystem services” - such as timber, carbon removal and biodiversity.

Our strategy also makes a complementary allocation to impactful unlisted businesses within the nature restoration supply chain and/or which provide enabling nature-market infrastructure in the UK.

Across our portfolio, we target quality investment opportunities that exhibit attractive long-term fundamentals – including exponential demand growth – and, critically, for which we can incorporate downside risk mitigation strategies.

Through carbon removal and abatement, restoring nature and biodiversity and creating skilled green jobs, across the UK, we aim to generate long-term and large-scale climate, biodiversity and social impacts while seeking to provide investors with solid financial returns.

Our investment universe includes:

Nature-based Real Assets

Impact Private Equity

Team

See our other Private Markets asset classes

Closely connected for enhanced outcomes

Heritage and track record

We have been connecting clients to Private Markets opportunities since our first real estate investment in 1983.

Client-centric investing

We’re passionate about connecting clients to innovative investment solutions that seek to deliver financial, as well as social and environmental returns.

Access to high-quality investment opportunities

Our 40+ year track record is driven by a mindset of building and nurturing long lasting relationships that deliver outcomes.

Enhanced outcomes and portfolio diversification

We believe our experience, deep networks and partnership approach enable us to get clients closer to the opportunities in Private Markets – because we are.

Uncover the real potential
in Private Markets

Connect with us to find out more:

Melanie Lange

Business Development, Iberia

[email protected]

To contact our IR team: [email protected]

Closely Connected

For enhanced outcomes

Sustainability

EOS Stewardship

Seeking to generate long-term, attractive financial returns through the preservation and restoration of nature and biodiversity

Investing to help restore nature
and mitigate climate change

The pillars of our offering

Why Federated Hermes Natural Capital?

How we invest