A majority of subsectors within agriculture have either an intrinsically positive impact or potential for alignment between profitability and mission, according to a principal at Bain Capital.
Chris Cozzone told Agri Investor that, as part of the firm’s sourcing strategy for its debut impact fund, which closed on $390 million in July 2017, Bain &Co. and Bain Capital undertook a joint study of the entire US economy. That study identified seven key sectors and 350 sub-sectors, rating them on a scale of low/medium/high “mission alignment.”
Sub-sectors categorized as having high-mission alignment are businesses that have an intrinsically positive impact, Cozzone explained, while those with high-mission potential are sub-sectors where positive impact would require some change in businesses approach.
“We can evolve a business model to be more impactful, which most investors don’t do. If we need transform a business model, it’s a bit complicated,” said Cozzone, though he declined to rule out the possibility of investment from the Double Impact fund within sub-sectors categorized as having low-mission potential.
The Double Impact Fund’s strategy is organized around key themes of Health and Wellness, Sustainability and Community Building. Cozzone said the strategy calls for a focus on investments with the same financial return potential of any private equity deal that also has intentional and measurable social and environmental impact.
It is the firm’s belief that there does not need to be a trade-off between financial returns and an intentional social mission or environmental purpose. Ideal investments, he said, have both.
“Bain Capital Double Impact is still refining our precise thesis, but we are really excited about the ag space because it really fits within how we think about impact,” said Cozzone. “We want to help Americans have better access to healthier and more sustainable food.”
Within ag, Cozzone said, the firm’s study of the food supply chain has included research into production agriculture, inputs, distribution and processing, as well as related technological services and consumer-facing products. Biological inputs, precision agriculture and services designed to limit food waste, for example, are included among the sub-sectors with intrinsic mission potential, according to Cozzone.
“As impact investors, these are the solutions that we like because there is a real alignment between the mission of just being better citizens and better business owners and being more purposeful, but also generating a good return for the business, the management team and our investors,” he said. “There is no trade-off between improving your yields in a cleaner way and reducing your waste, and your own profit.”
Thus far, food-related investments from the Double Impact fund have included two restaurants: By Chloe, a plant-based restaurant chain, and Sustainable Restaurant Group, a collection of mission-focused restaurant chains that include sustainable seafood-focused offerings Bamboo Sushi and QuickFish.
While many investments from the Double Impact fund in other sectors have focused on business-to-business deals, Cozzone said, consumer-facing ag and food related investments also have potential to create changes in supply chains.
“When you look at: people raising issues related to caged chickens; then you start having cage-free chickens and pasture-raised chickens. Information brought that and it ends up being consumer demand,” Cozzone said. “I would not underestimate the power of customer advocacy to change the system.”