Andrew Martin, Bloomberg, 10 December 2015
Environmental and animal-rights groups have spent decades arguing against large-scale, intensive livestock facilities, arguing that these so-called factory farms are bad for the environment, farm animals, and human health. A private equity investor is taking a different approach to the same fight.
Jeremy Coller, who founded London’s Coller Capital, is warning investors that ignoring animal welfare and other risks associated with industrial livestock farms can be bad for their bottom line. He created the Farm Animal Investment Risk & Return Initiative to create a network of like-minded investors who consider animal welfare and other factory farm issues in their decisions. Coller, a vegetarian, said the effort is “about materiality,” not morality. “It’s about being a bad investment risk.”
Coller has just released a 31-page report that includes “killer stats investors can’t ignore” about intensive livestock farming. The report doesn’t single out companies for investors to avoid. Instead, he outlines more than two dozen environment, social, and governance issues related to industrial livestock farming that he says pose financial risk. For instance, the report notes that livestock produce greenhouse gases that contribute to climate change, threaten human health by creating antibiotic resistant bacteria, and consume vast natural resources, such as land and water.
Consumers, companies, and regulators are already making changes to the market, leading to reductions in reducing antibiotic use and the phasing out gestation crates for sows and battery cages for hens. But he believes investors have been slower to consider the consequences of factory-style farming as part of a responsible investment strategy. “There is a huge knowledge gap for investors,” Coller says. “What we are trying to do is start this network to fill this knowledge gap.”
The report, released Wednesday, comes in the midst of a vigorous debate about how to feed a growing population despite diminishing natural resources. American livestock farmers produce relatively cheap and abundant meat and dairy products on industrial-style farms, and those methods are being exported to developing nations, particularly in Asia, to meet increased demand for animal protein. But some scientists warn that the trend is unsustainable. While profits at many agribusiness giants””including meatpackers Tyson Foods and JBS””remain robust, Coller’s report cites several examples of the economic perils of industrial livestock production. The 2008 animal welfare scandal at California-based Hallmark/Westland Meat company, in one high-profile example, led to the biggest meat recall in U.S. history and an eventual bankruptcy.
Abigail Herron, head of responsible investment engagement at Aviva Investors, which signed on to Coller’s initiative, says her firm uses animal-welfare practices as a proxy for a company’s governance. If a company is behind the times on animal welfare, she says, it raises concerns about what other areas might be lagging. “Companies that address these issues better will perform better,” Herron says.
Coller suggests agribusiness and food companies that ignore animal welfare and environmental concerns will become “the new coal,” losing their luster with investors as the risks become more apparent. His report cites the “tasty financial results” for companies that embrace his worldview, including Hampton Creek, the maker of egg-free Just Mayo, and Chipotle Mexican Grill, the fast-food chain that highlights its commitment to animal welfare. But even those investments aren’t risk free.
The recent E. coli outbreak at Chipotle has sickened dozens of people and caused its high-flying stock to plummet””but that hasn’t moved Coller from his support of their practices. “E.coli is a food safety issue rather than a farm animal welfare issue and could happen to any company,” Coller said.