Timber and forestry investment is gaining ground in Europe, as private equity increasingly shifts towards climate-aligned strategies. A recent EY report highlights growing momentum behind timber and forestry funds, previously seen as niche, now positioned as core components of sustainability-focused portfolios.
Despite global private equity fundraising falling to $680 billion in 2024, the lowest since 2015, investors are favouring fewer, larger deals. Europe is leading in sustainable asset allocation, with over half of all new fund launches in Article 8 and 9 categories under the EU Sustainable Finance Disclosure Regulation, according to Morningstar.
Timber and forestry funds attracted $8.4 billion in 2024, slightly down from 2023 but above the five-year average. These funds often deliver double-digit internal rates of return, with top-performing vintages exceeding 16 percent.
Key drivers include increased demand for renewable construction materials, carbon sequestration potential, and EU-backed afforestation policies. EY describes timberland as offering “low correlation to public markets”, built-in inflation protection, and strong climate resilience.
With the convergence of risk, return, and environmental impact, the report suggests timber and forestry funds are no longer peripheral, they are becoming central to the future of sustainable investment in Europe.