ESG is integral at TZP Group. In fact, it is now one of the four pillars that define the lower middle-market private equity firm. ESG has been integrated in all new investments from sourcing, due diligence to post-investment. Beyond investment practices and the portfolio, ESG is also deeply integrated into the core of the firm’s operations.
TZP is an original signatory of the ILPA Data Convergence project, which is a voluntary industry association to standardize ESG metrics. The firm has developed ESG 360, a customized program designed specifically for lower middle-market companies that is aligned to industry standards including the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures frameworks. During diligence, portfolio companies are mapped to one or more of the 77 SASB industry profiles.
ESG 360 takes into consideration all stakeholders that impact a business. The firm defines stakeholders as management, employees, partners /suppliers, customers, community, the environment and investors and views them as the critical groups that affect every business. There is a specific set of metrics for each.
TZP, which was named a PE Innovator in ESG last year too, reports its ESG results via an annual impact and ESG report. The inaugural report, published last year, explains that among the reasons TZP decided to develop ESG 360 is that ESG frameworks and industry standards are still being developed and refined. And when best practices do exist, they are often designed for larger companies.
TZP’s portfolio companies have direct relationships with a dedicated ESG team to work on ESG initiatives including sustainability, diversity and inclusion, and carbon reduction, among others. Investment teams work directly with portfolio companies to remediate risks and focus on value creation.
“ESG is no longer a part-time or ad hoc practice,” says Justin Kulla, head of ESG. “ESG is required for every business as a way to de-risk and unlock value by taking into account its full range of stakeholders: management, employees, partners/suppliers, customers, communities, environment and investors.”
The TZP Cares Foundation has donated to over 400 non-profit organizations over its history. The foundation is funded by TZP employees and designated by portfolio companies in their own communities.
In addition, six out of the last 11 investments by TZP were founded or are led by women. The company has also launched an intern-analyst program to bring in diverse talent.
For our full 2022 Private Equity Innovators in ESG coverage, click here.