Nest has agreed a partnership with Legal & General (L&G) and Dutch pension fund, PGGM, collectively investing up to £1bn into build to rent schemes across the UK.

Initially backed by £350m of combined investment, the new partnership is set to build on L&G and PGGM’s existing joint venture, the Access Development Partnership (ADP), with the portfolio expected to grow to £1bn over the coming years.

L&G and PGGM have been investing together in UK build to rent schemes since launching the joint venture, ADP, in 2016, in an effort to expedite the delivery of high-quality rental homes across the UK while also driving stable returns for institutional investors.

With locations already lined up for the second phase of the initiative, all new rental schemes will be targeting net-zero in operation by 2030 and will be built on brownfield sites in city centres.

Described as an “exciting new investment opportunity” for Nest’s members, the commitment is also intended to support the government’s target of delivering 1.5 million more homes.

Pensions Minister, Emma Reynolds, highlighted the announcement as evidence of the opportunities for the pensions sector to contribute to UK communities and grow the economy.

“I am delighted that Nest is harnessing the financial power of pensions to deliver more of the homes this government has pledged to build, which also serves as an excellent investment opportunity for future pensioners in their scheme,” she stated.

“The government’s landmark pensions review seeks to unlock billions of pounds of investment in the UK economy and drive pension capital into long term growth assets to make every part of Britain better off”.

Nest chief investment officer, Elizabeth Fernando, added: “We can see there’s a critical shortage of housing supply, coupled with increasing demand for high quality rental homes. By building more properties, we can extend to our members a great investment opportunity while helping to meet this demand and bolster the rental market.

“This is a great deal for our 13 million members and the UK. By also drawing in international investment from PGGM, we’re amplifying our impact and providing much needed residential properties across the UK.”

L&G group chief executive officer, António Simões, also highlighted the news as “a strong step forward in putting pensions to work”, as well as an “important milestone” for L&G’s ambitions in private markets and crowding in third-party capital.

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