Private debt firm White Oak Global Advisors has hired a private equity veteran to lead its ESG and impact investing business.
Jon Patty will join White Oak as a managing director and partner, the firm said in a statement seen by affiliate title New Private Markets. White Oak also employs Terésa Cutter as head of ESG and impact.
Patty was most recently head of private equity and a managing director at New Island Capital. He has also held roles at MC Partners, a $1.5 billion private equity firm, and JPMorgan Capital, then a $4 billion private equity effort, according to White Oak’s statement.
The firm declined to explain how Patty and Cutter’s roles relate to each other but NPM understands the two will work side-by-side, collaborating to grow the impact investing business.
San Francisco-headquartered White Oak originates loans and provides refinancing and other credit options for small and medium-sized enterprises. It is raising its fifth Yield Spectrum Master fund with $2 billion target, according to affiliate publication Private Debt Investor‘s database.
ESG in underwriting
White Oak has had an ESG and impact investment strategy in place for about seven years, Patty told New Private Markets. It also “has a track record of over $3.8 billion in ESG-aligned investments since inception”, the firm said in its statement about his appointment.
“White Oak’s Impact strategy is not simply a fund, but extends to its underwriting process for loans across the entire business,” a source familiar with White Oak told NPM.
This ESG and impact investment strategy incorporates ESG evaluations in White Oak’s underwriting process when originating loans.
I believe that an investor’s influence – regardless of position in the capital structure – actually comes from trusted relationships, compelling ideas and shared goals.
Jon Patty, White Oak
“This allows us to bring flexible, customised financings to those companies who have leading ESG profiles and to those who offer truly impactful products and services,” said Patty. One investment through White Oak’s impact strategy is its financing of clean energy projects for commercial real estate through California’s Property Assessed Clean Energy programme, disclosed in 2019.
White Oak has developed a proprietary ESG rating system to evaluate companies and identify potential investment opportunities. The firm “employs rigorous, private equity-style due diligence practices” and has an “intent of finding the best ESG and impact opportunities in the market”, Patty said.
An investor’s influence
Alongside its focus on investing in companies that already have strong ESG performance, White Oak seeks to “help drive ESG performance improvement”, he added. “I have the opportunity at White Oak to take a constructive partnership approach in working with management teams.”
Patty does not believe his move to private debt, where investors typically have less control over assets than private equity investors, will limit his influence over assets: “I believe that an investor’s influence – regardless of position in the capital structure – actually comes from trusted relationships, compelling ideas and shared goals.
“Even when serving as a board member, I came to believe that enhancing a company’s ESG profile should not have to come from using control provisions to force a reluctant management team to change the company. Instead, positive change should result from authentic intentions, strong thought partnership and shared passion for doing the right thing. Building engaged management relationships can lead to productive dialogue and shared initiatives around enhancing a company’s mission, managing risk and driving successful financial performance.”
White Oak also invests in fossil fuels: its investments include US coal mining company Atlantic Carbon Group and a £90 million ($124 million; €105 million) investment in British Steel. The firm’s website lists oil and gas as one of its sectors of expertise for financing.
White Oak declined to comment on these investments but a source familiar with the firm told NPM that it is actively using its impact investment strategy to find alternatives to displace fossil fuels in the marketplace.