Published on 21, Feb 2023

Making ESG Profitable

A conversation with Green Growth’s board members on leveraging technology to solve big challenges for the industrial complex
 

With the increased regulatory pressure and investor demands for companies to demonstrate their commitment to environmental, social and corporate governance (ESG) standards the challenge for most corporate boards is how to balance ESG requirements with delivering profits to shareholders. Green Growth sought to solve this very problem and in so doing delivered hefty returns to investors. Their secret? Investing in Agricultural technologies (AgTech) that could improve the consumption of finite resources utilized in traditional industrial farming and food manufacturing processes. After closing their final deal in a series of M&A transactions, Green Growth’s board members, Simone Grimes and Gary Oliver Gary Oliver, say they are bullish on the future of green startups that can redefine standard industrial practices in a way that is good for the planet, which in turn is good for investors and consumers. 

 AgTech is a highly nuanced industry that leverages technology, machine learning, and predictive analytics to solve big challenges for the industrial complex. The rise in AgTech solutions has coincided with changing ESG regulations and the increase in investor proxy proposals that challenge companies to shift their corporate strategies to emphasize having a positive impact on the planet and society.  Simone Grimes understood that larger agriculture and manufacturing companies would be looking for opportunities to make their processes more sustainable. Green Growth poised itself to develop assets as acquisition targets for the industrial complex by leveraging technology to refine traditional industrial processes to achieve similar results while reducing negative environmental impacts. 

Simone Grimes, Green Growth’s Founder and Board Chair, and Gary Oliver, Green Growth’s Chief Risk Officer, focused on acquiring and developing sustainable agriculture and food production assets across Illinois, Ohio, and Canada and leveraging a series of M&A strategies to deliver healthy returns to investors. Now Green Growth is influencing how corporate boards see the opportunity to make ESG value accretive versus a costly regulatory burden.   

Simone Grimes recommends that emerging growth companies align the fiduciary duty of the board of directors with the contractual provisions of its fund or portfolio. “Without this, no company can realistically reach its full potential,” she believes. “Gary and I wanted to do something that would honor the sentiment of our investors, which was to use their capital to create a social good while prioritizing ROI (returns on investment).” 

 Thinking back on their journey with Green Growth, Simone Grimes emphasized “we understood that while it's crucial that businesses become more sustainable, it’s equally important to deliver real value to shareholders. So, we focused on AgTech because by making ESG profitable, we could affect changes in investor behaviors, demonstrate to corporate boards that ESG can be profitable, and influence positive social and environmental outcomes.” 

 Acquiring and developing assets was the first goal. Gary Oliver states that as they grew their portfolio, they encountered challenges. “COVID-19 was a major obstacle, as it created regulatory uncertainties and corresponding delays in regulatory approvals,” he recalls. “However, we did our part to ensure regulators, investors, and community partners understood the sincerity of our goal, which was to reduce GHGs in the manufacturing process, have a positive social impact in the communities we operated in, and enable existing companies to scale their ESG programs.” 

In 2020, while the economy was in a period of uncertainty, Simone Grimes took on the position of board chair to lead the company through a period of rapid growth. “We became hyper focused on refining our assets and proving that our technology investments resulted in reduced GHG emissions. Simultaneously we identified target buyers and aligned our strategies accordingly.” Simone Grimes states “The goal of our fund was to deliver ROI to investors over a seven-year investment horizon; COVID 19 allowed us to speed up that process and deliver returns in less than four years. It’s a great feeling to surpass commitments to investors.”

As 2021 progressed, Simone Grimes says, they were able to successfully dispose of most of these agricultural assets with quantifiable ESG components. “We focused on delivering value to the acquiring entity, their investors, and the people and communities in which the assets operate. Our last asset was successfully disposed of in May 2022.” 

Simone Grimes Simone Grimes details how she and Gary Oliver were able to make AgTech profitable for investors. “We focused on using M&A strategies to make ESG assets generate hefty ROIs,” she says. “What we invested in was key, as we also wanted to make a difference for society. We chose AgTech because the assets we invested in could be leveraged in industrial agriculture to make farming more sustainable.” Simone Grimes believed that like the trends in the beauty industry, where large companies like Estée Lauder and L’Oréal relied heavily on M&A to outsource their innovation efforts, companies will also seek to acquire sustainable assets to meet their ESG goals.  

Gary Oliver knew they would need capital to successfully compete for some of the assets they wanted to acquire. They turned to the same investment groups that they had served on to evaluate investments, leveraging everything they knew about investment models.

“We stood up several special purpose entities, all with the end game of disposition,” Simone Grimes says. “We also assembled a team of SMEs (subject matter experts) in sustainable agriculture, engineering (MEP design), and manufacturing techniques as well as green building designs. In short, we created the perfect team to achieve our goals for AgTech and farming.” 

Their experience in bringing more profitability to AgTech has led to insights into board governance that Simone Grimes frequently shares with her industry peers. “First, directors of corporations owe a fiduciary duty to act in the ‘best interests’ of the shareholders of a corporation,” she states. “In heavily regulated industries, such as agriculture, the interests of the regulator must be incorporated into every decision.” 

Second, good corporate governance always starts at the top. “You may have good intentions for your industry, but you won’t get anywhere if your board isn’t solid,” Simone Grimes states. “On our board, we make sure everyone understands their fiduciary duty to our investors, regulators, and the communities who have invested in us. Each of our dispositions included a firm commitment to the social commitments we made, including hiring and training employees from within the community, paying livable wages, and incorporating a DEI strategy.” 

Simone Grimes states that in a company that is positioned as a social good and that has support from regulators who in turn rely on the company for public reporting, the board must equally consider the priorities of investors and of regulators. “Fiduciaries should always act with due care, skill, and diligence,” she says. “They must invest just as an ‘ordinary, prudent person’ would do.” 

Gary Oliver believes that risk oversight at the board level is just as important. “Risk oversight is a primary board responsibility as part of their corporate governance,” he explains, “and in the evolving business and risk landscape, who could have predicted the impact of COVID-19? As such, directors need to develop and continuously improve practices to establish a well-defined and effective oversight function.”

Today’s boards play a critical role in influencing management’s processes for monitoring risks, Gary Oliver says. “As such, they should clearly define which risks the full board should discuss regularly versus risks that can generally be delegated to a board committee. While many boards have a defined risk governance structure, it is important to continually assess the structure as companies will most certainly continue to face new risks.”

All of these board practices can position a company to make vital contributions in any industry and to create social good, especially in AgTech. Simone Grimes recommends that boards keep them in mind as they look for ways to positively impact the planet. Agriculture, she believes, holds enormous potential for investors and entrepreneurs. 

“I have seen over the last few years that agriculture is implicated in multiple aspects of environmental, social, and governance (ESG) investing,” says Simone Grimes. “Also, data and technology are making sustainability easier to measure, which will be needed as the pressure for more reporting at deeper levels of granularity on ESG metrics continues. Corporations will ultimately have to rely on green startups to outsource their ESG innovation.” 

Gary Oliver states “I believe strongly that as ESG reporting gets more precise and quantification gets more granular, large companies will have to outsource their innovation through acquisition - much the same as we’ve seen in the beauty industry.”  

“We are only getting started on realizing the potential of AgTech to make farming sustainable and, in turn, have a positive impact on the Earth,” says Simone Grimes. “Now is the time for more companies to invest in it so that future generations can benefit.” 

Gary Oliver, an international security specialist, is the owner of BSG, LLC,and a former member of the British Armed Forces. He has worked in conjunction with specialized agencies that include MI5, Special Branch, and the Special Air Service. Gary Oliver has over 35 years of operational experience gained from his corporate and military knowledge of risk management. Gary Oliver spent 10 years as a member of the Saudi Ambassador to the US Armed Close Protection team, where he worked with the State Department Dignitary Protection, Secret Service, FBI Hostage Rescue Team, Joint Terrorism Task Force, and other international government security services. 

Simone Grimes, CPA is a corporate board member, Chief Financial officer (CFO), and entrepreneur who has a BSC in Accounting, MS in Finance, and MBA from Cornell University. She has held financial leadership roles across various industries, including financial services, big-four public accounting, tech, and consumer products. Simone Grimes has worked with Fortune 100 public company boards of directors to implement robust Cybersecurity Governance programs. Simone Grimes sits on three non-profit boards and is the independent chairman for a corporate board. She is committed to ensuring that the role of corporate board members is value accretive, including their critical role in cybersecurity corporate governance.