Candriam is a leading European asset manager with over €120bn in assets under management and is a founding signatory of the UN-supported Principles of Responsible Investment (PRI). Candriam has one of the largest socially responsible investment research teams in Europe and provides a broad range of socially responsible investment (SRI) strategies across a range of regions and asset classes including equities and fixed income.
Animal welfare and factory farming as key criteria
Candriam assesses both the financial and sustainability performance of companies as part of a ‘Best in Class’ approach to portfolio section. Thus a business model’s intrinsic sustainability and whether its corporate governance is aligned with the long-term interests of Candriam’s clients are key parts of asset allocation.
As part of its assessment of the sustainability of a business model, Candriam scores factory farming and those businesses earning a majority of their turnover from animal protein products negatively. This is due to the industry’s significant impact on natural resources and high levels of greenhouse gas emissions. More sustainable approaches to farming are rewarded. Animal welfare practices are also systematically incorporated into Candriam’s SRI analysis, both with regards to livestock farming and to controversies related to animal abuse in sectors such as textiles or pharmaceuticals.
Hidden ESG risks in food supply chains
Candriam believes that food companies have a unique exposure to sustainability and see the traceability and environmental impact of supply chains as an important part of their analysis of food industry. Sophie Deleuze, Senior SRI Analyst at Candriam explains, “We recognise the material risks posed by opaque supply chains, particularly in the form of operational and reputational risks for these companies”.
“The firm takes part in direct dialogues with company management, and has joined investor groups to urge action on key issues such as the overuse of antibiotics. Candriam engages with companies in the food industry on sustainability issues both during initial investment review and if there are controversies such as food safety scandals. Candriam engages both at individual company and sector levels, and we take part in collaborative engagements such as the FAIRR engagements on antibiotics and sustainable protein. We are insistent that corporates in the food industry have a key role to play in driving innovation behind more sustainable alternatives. They have a responsibility to nudge consumers towards products with a smaller environmental footprint.”
Exercising shareholder rights
Candriam votes on animal welfare related shareholder proposals based on their ‘Best in Class’ analysis, which takes into account the existing policies and practices of the company in question. According to Deleuze, “We try to be as forward-looking as possible. We tend to adopt a pragmatic and balanced approach focused on the long-term opportunities and risks associated with sustainable farming.”
“Tools such as the Business Benchmark on Farm Animal Welfare (BBFAW) enable us to improve and refine our sustainability analysis.”
– Sophie Deleuze, Senior SRI Analyst at Candriam
Candriam also makes use of industry benchmarks to assess the sustainability performance of companies in the food sector. The ESG performance of suppliers to the food sector are especially important to Candriam, and analysts track good practices using tools such as the Business Benchmark on Farm Animal Welfare (BBFAW). Companies’ responses or lack thereof enable us to improve and refine our sustainability analysis.
Candriam pays close attention to new asset classes that have the potential to improve the environmental impact of food production. Deleuze explains, “We think green bonds could play a greater role in the promotion of sustainable agriculture, even if it’s still marginal at the moment, particularly given the recent interest of emerging markets in these types of bonds.
“Animal welfare as an ESG issue is, and will continue to be, promoted by our SRI investments. High animal welfare standards form an essential part of the business models we believe in.”