Integrating sustainability at every stage

More than simply a way of reducing risk, prioritising sustainability can be a vehicle for value creation, say Roc Partners’ Michael Lukin, Brad Mytton, Frank Barillaro and Sam Bayes.

It is all too easy to think of sustainability in narrow terms. To protect against this, it’s important it is viewed not purely in terms of risks but also the potential rewards on offer. At the same time, businesses and individuals are increasingly exploring sustainability as something that extends far beyond environmental matters.

At Roc Partners, sustainability is integrated within every stage of the investment process to guard against a blinkered view. Speaking with Agriculture Investor, the company’s Michael Lukin, Brad Mytton, Frank Barillaro and Sam Bayes, explained why it is now seen as being as important as any other metric when evaluating investments.

Could you tell me about some of the trends you’ve seen around sustainability and agriculture and how these have developed over time?

Michael Lukin: Roc Partners has integrated sustainability and ESG into our investing for many years with a consistent goal of setting up businesses for long-term success.

In our 25 years of engaging with investors, we’ve noticed an increasing sophistication with how they think about sustainability. This applies to institutional investors, wealth managers and family offices we work with. Initially, many investors focused on negative screening but we are increasingly seeing a shift toward positive screens in terms of how portfolios are positioned. As long-term investors with a five or 10-year horizon, we need to remain conscious of the increasing focus on sustainability and governance with our investment decisions.

While we see the increasing importance in sustainability within food and agriculture we know that a transition to a more sustainable future will take significant capital and that private markets are a good place for these transitions to occur. We see a lot of companies that will benefit from an increased sustainability focus, and know that their paths to sustainability will vary. Some are already set up with strong tailwinds attached, others will require more capital support to their transition into a more sustainable footing.

Brad Mytton: As part of the sustainability mix we are seeing significant activity around carbon mitigation strategies, and a lot of agricultural land can play a large role in this. We have an environmental planting fund being launched that will invest in a portfolio of projects to generate high-integrity carbon offsets that will be available to fund investors, allowing these investors to offset their own emissions footprint.

Another supportive dynamic in the food and agriculture space is the natural alignment with sustainability and better farming practices. For instance, our portfolio company Stone Axe Pastoral Company, a premium Wagyu beef business, has many initiatives around farming and the supply chain to produce more, better-quality beef with lower input costs. This includes investments in pasture management, regenerative farming, and emissions reduction. We continually look for ways to implement impactful sustainability projects within our portfolio companies and develop methods of quantifying, formalizing and codifying these efforts.

Could you elaborate