By Lynda Kiernan, Global AgInvesting Media

Farmers and agricultural investors alike have an increasingly heavy burden: to not only feed a booming global population, but to do it in a way that mitigates climate change, pollution levels, soil degradation, overexploitation of water resources, drought, and species, habitat and pollinator loss – while also addressing labor issues and social inequality that are plaguing not just specific regions, but because of globalization, the world as a whole.

As our timeline for addressing these issues grows ever shorter, calls for action from the public and stakeholders alike are growing louder. It took a decade or more, but impact investing – a term originated by the Rockefeller Foundation in 2007 to reflect an investment mission that aims to result in positive, measurable benefits for the environment and society while also generating healthy financial returns – has gained traction. As of the close of 2018, global impact investments totaled $502 billion, according to the Global Impact Investors Network (GIIN) – up from just $35.5 billion in AUM only three years before. Likewise, Morningstar data indicated that last year, new investments in ESG-focused mutual and exchange-traded funds totaled $20.6 billion, up from $5.5 billion the year before, reflecting growth of 400 percent. 

To help guide and direct millions of good intentions in a common direction, the UN has created and set forth the Sustainable Development Goals (SDGs) – a universal collection of 17 goals, targets, and objectives to act as a syllabus as it were, for the achievement of a more sustainable future.

For its part, Paine Schwartz is a signatory to the Principles for Responsible Investment – a leading driver for incorporating the principles of environment, governance, and sustainability (ESG) into the investment process.

“As a significant investor in the global food and agribusiness sector, we are in a position to influence agricultural solutions in support of the goals established by the United Nations’ Sustainable Development Goals (SDGs),” noted Paine Schwartz in their 2020 report, adding, “Our firm is committed to proactive, day-to-day management of key ESG issues across the portfolio and believes that responsible stewardship helps protect and enhance the value of our investments.”

Over the course of last year, the firm advanced its climate strategy by quantifying a number of environmental metrics, including calculating greenhouse gas emissions across its portfolio. And within its own operations, the firm has instituted structures to mitigate risk, to identify conflicts of interest, and to instill anti-corruption policies – all measures that are being routinely audited to ensure compliance.

Twenty nineteen also marked the final closing of the firm’s Paine Schwartz Food Chain Fund V, L.P. (Fund V) in September, which targeted an impressive $1.2 billion and exceeded that goal at $1.425 billion, due to oversubscribed demand and strong interest from its investors. In addition to sustained strong support from North American limited partners, Fund V generated increased demand from the international community, including the Middle East, Western Europe, and Asia, including Japan.

Additionally, this month, as part of Paine Schwartz Veteran’s Initiative, the firm announced its financial support for Hope For The Warriors – a leading nonprofit to help veterans transition financially, professionally, and personally back into civilian life. Kevin Schwartz, CEO of Paine Schwartz, will also serve on the organization’s Board Council. 

In order to successfully integrate ESG into its investment process, Paine Schwartz uses a range of tools including benchmarking, the adherence to industry standards such as those put forth by the Sustainability Accounting Standards Board (SASB), and third-party advisory to identify areas where its portfolio companies could focus their ESG efforts.

In the following report, Paine Schwartz offers individual portfolio case studies for each of its companies including Business Snapshots and ESG and Sustainability Initiatives and Goals for each.

“There is broader evidence that private equity firms can improve portfolio performance by focusing on ESG as an additional set of value creation levers,” noted the firm in the report. “Such firms generally reduce costs and improve productivity while uncovering new revenue channels.”

Still, the most compelling reason to consider ESG in the investing process is risk mitigation,” stated Paine Schwartz. “These risks are frequently unquantified, but that is often because they have not yet captured the attention of credit rating agencies. Over time, this proactive approach can keep investors in the forefront of risk identification. That, as much as anything, has attracted an estimated $30 trillion in investments in ESG strategies as of early 2018.”

 Download the full report here. 

 

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.