After deciding to commit to the accord, the harder question is where to allocate capital, says Steven King.
Under the Mansion House Accord, 17 of Britain’s largest workplace DC providers – covering around 90% of active savers – have committed to allocating at least 10% of their default funds into private markets by 20301. This is expected to put money to work in the domestic economy while improving long-term returns. The difficulty begins with a more practical question: where, exactly, should that money go?
The increasing appetite for private markets has left some of the most obvious destinations – private credit chief among them2 – to become crowded3. The problem is that crowded strategies don’t diversify risk – they concentrate it in places investors can’t easily see. The benefits of diversification erode as more capital flows in, creating a problem for trustees.
Recent research indicates that more than 80% of asset managers and owners consider sustainability to be an important part of managing investment risk.
Steven King, RMS
This problem is complex because trustees do not allocate in a vacuum. Instead, they are responding to three pressures at once: regulatory expectations for greater private market exposure, member demands for net zero and biodiversity commitments, and a more volatile macro environment that is exposing the fragility of traditional portfolios. While each pressure is manageable in isolation, together they present a genuine allocation problem as each private asset class responds differently to these pressures.
Timberland stands apart because its return drivers are fundamentally unique. It doesn’t rely on refinancing cycles or financial leverage. Instead, returns result from both biological growth and underlying demand for timber, creating a dual engine that is far less sensitive to market conditions. Global demand for timber is also rising, with the World Bank estimating the market could increase fourfold by 20504, driven by sustainability efforts, rising populations and economic growth.
These return drivers show up in the data. The NCREIF Timberland Index5 shows average annual returns between 1991 and 2024 were 9.3%6, outperforming commercial real estate, corporate bonds, gold and the FTSE All Share – and did so with lower volatility than equities7. Timberland has also proven to provide an effective hedge against inflation and resilience against external market shocks that few asset classes can match.
In addition, for a pension fund with long-dated liabilities, duration matching is as important as returns. Timberland, with its long biological growth cycles, can help achieve alignment with pension payments. Forests provide a flexible way to match duration8, aligning cash flows with liabilities, as timber can be harvested at different stages of its life cycle.
Recent research indicates that more than 80% of asset managers and owners consider sustainability to be an important part of managing investment risk9. Unfortunately, environmental claims can be easier to assert than to prove. Carbon markets – one of the most high-profile efforts by financial markets to quantify environmental impact – have faced persistent questions about over-crediting, inconsistent baselines and weak verification. But while past scepticism was not without reason, environmental benefits are becoming more accurately measurable.
The question is no longer whether to allocate more to private markets, but how to do so without reinforcing the same concentrations and vulnerabilities.
Steven King, RMS
What has changed is not the ambition, but the discipline around measurement. Forests can still decarbonise a portfolio, aligned with frameworks such as TNFD10 and CSRD11, but the focus is shifting toward asset-level data and more standardised methodologies.
Tools such as the RMS Ecosystem Integrity Index (EII)12 reflect this shift, providing quantifiable, fund-level data on ecosystem integrity that can feed directly into disclosures. This does not eliminate risk, but narrows the gap between what is claimed and what can be evidenced, which, for institutional investors, has always been the important test.
These factors all feed into the broader challenge of portfolio construction. The question is no longer whether to allocate more to private markets, but how to do so without reinforcing the same concentrations and vulnerabilities.
While timberland is unlikely to be accord signatories largest allocation, there are signs that they are beginning to move towards natural capital13. It may prove to be one of their most useful allocations, precisely because it behaves differently when it matters most.
Steven King is a senior vice president at Resource Management Service (RMS)
2. www.wsj.com/finance/private-credit-tracker-8abcf8ca
4. documents1.worldbank.org/curated/en/240231467291388831/pdf/106467-REVISED-v1-PUBLIC.pdf
5. user.ncreif.org/data-products/timberland/
8. blogs.worldbank.org/en/psd/seeing-forest-trees-why-pension-funds-should-take-another-look-forestry-asset-class
9. www.morganstanley.com/insights/articles/institutional-investor-sustainability-signals-report-2025
10. tnfd.global/recommendations/#overview
12. www.esginvesting.co.uk/2026/01/rms-launch-new-forest-biodiversity-index/
13. www.pensionsage.com/pa/Natwest-cushon-to-invest-in-natural-capital.php