Paine Schwartz Partners: Investing in Impact

ESG has been gradually rising in importance for many years and has shifted from an optional extra to a business imperative.

One company that was early to the party was Paine Schwartz Partners, a private equity firm specializing in sustainable food chain investing.

With a focus on the food and agribusiness sector, it directly addresses the challenge of feeding more people healthier food with more efficient use of resources. As such, it has a natural affinity with environmental interests.

However, the firm goes beyond thematic alignment. It aspires to nothing short of leadership.

We spoke to the team about how they approach sustainability and how they intend to continue the journey.

Sustainability from within

It would be easy to suggest that Paine Schwartz approaches sustainability as an adjunct to its agribusiness and food chain investment focus. It is clear that the environment and food resources matter deeply, but sustainability also means much more to the team.

The firm recently published its seventh Annual Sustainability Report and evolution is a clear theme throughout. It maps the journey from its first formal ESG policy in 2015 to becoming an early adopter of the Taskforce for Nature-related Financial Disclosures (TNFD) in 2024.

In 2023, the firm hired Rachel Hurley as its first Head of Sustainability. Rather than being a sign of a new commitment to sustainability, the role was a sign of how much work was already being done across the organization. Quite simply, it made sense to centralize the role as it had become an increasingly large part of many individuals’ roles.

Indeed, Paine Schwartz has adopted the broader notion of Environmental, Human, and Corporate Sustainability as a nod to its ambition in this area.

Underpinning its approach to sustainability is the belief that diversity matters. At a firm level, it has made female hires in seven of its last ten senior hires. At an industry level, it hosts events to raise awareness among young women about the asset management sector.

“We don’t look at sustainability as a standalone topic,” explains Renata Dinkelmann, Head of Human Capital. “It is good business to have a diverse workforce and it is good business to consider the environment. We consider these things because it helps us create value.”

A portfolio with power

Portfolio companies are aligned to UN Sustainable Development Goals (SDGs). Their performance against these targets is quantified and measured.

For 2023, Paine Schwartz collected more than 70 sustainability-related data points from 15 portfolio companies as part of its Sustainability Reporting Program. This data is then used to identify key actions and forms an important part of the tailored sustainability goals for the CEOs of each majority-owned company.

But this is not just a data-driven top-down approach as conversation is actively encouraged across the portfolio.

Portfolio companies are invited to a quarterly webinar series addressing topics which are material across the sector as a whole.

Topics include Diversity, Equity, Inclusion & Belonging (DEI&B); Human Rights Regulatory Compliance, and Health & Safety. It is a platform to create conversations and share best practices.

Stakeholder engagement

LPs have proved a pivotal force in moving ESG up the agenda within private equity and Paine Schwartz has sought to tap into that momentum.

At the end of 2023, it launched its Fund VI LP Sustainability Council – comprised of LPs looking to drive sustainability in private equity.

While the council is still new, members have already been surveyed and an ambitious roadmap for its future set out.  

“This is a group of like-minded investors who care about sustainability. We can learn what guidelines they want GPs to be signatories to, what programs they want GPs to participate in, and how industry-wide initiatives are being approached and implemented. It also enables our investors to see how we are implementing these issues in a practical way,” explained Natalya Michaels, Head of Investor Relations.

For Paine Schwartz, it is not only an opportunity to engage, but an opportunity to learn from investors who are deeply involved on these topics with the industry as a whole.

From early adopter to aspiring leader 

ESG undoubtedly presents challenges for private equity – notably a lack of data and resources. Paine Schwartz has approached these challenges as an opportunity – embracing the subject throughout its firm, its portfolio, and with its LP community.  

“The general direction at PSP is a position of leadership. From the “table stakes” of what every GP needs to do to be compliant; to “strategic integration” where GPs are creating value through sustainability and ultimately evolving to “leadership” where the industry is redefining what best-in-class sustainability means for private equity,” explained Rachel Hurley, Head of Sustainability.  

Paine Schwartz is well-positioned to play a leading role in that journey.