More than 70% of the world’s meat comes from factory farms, but investors not aware of hidden risks. There are a number of environmental and public health costs associated with intensive or ‘factory’ farming. The FAIRR Initiative has identified at least 28 environmental, social and governance (ESG) issues that could significantly damage financial value over the short or long term.
Climate change and deforestation
Major environmental risks include its contribution to climate change, deforestation, biodiversity loss, natural hazards and water scarcity. Livestock farming is responsible for 14.5% of GHG emissions and 55% of methane emissions, with an increased risk of regulation to curb its contribution to climate change. The sector is also exposed to the impacts of climate change, with a 21% rise in cattle costs predicted due to heat stress. In South America, approximately 50% of the Cerrado’s forests and native vegetation has already been cleared for agricultural expansion, mainly for soy (used as animal feed) and cattle production.
Public health issues include the overuse and misuse of antibiotics, and air and water pollution. The overuse of antibiotics in factory farms not only contributes to the rise of antibiotic resistance but also catalyses outbreaks of animal pandemics, such as swine flu (H1N1), avian flu (H5N1) and the coronavirus (COVID-19). Around 70% of all antibiotics (by volume) in the US are used in farms. In October 2015, California became the first US state to ban routine antibiotic use in farm animals. EU legislation on veterinary medicines is currently being revised; this could lead to new restrictions on the regular preventive use of antibiotics in intensive farming. An estimated $3 billion of economic damage was caused by avian flu in the US in 2014 — 40 countries placed bans on US poultry and food companies — which was catalysed by factory farming.
Animal waste must be carefully disposed of to avoid harm to waterways and the wider environment. The cost of cleaning up the soil under US pig and dairy CAFOs is estimated at US$4.1 billion. The US meat company Tyson had to pay at least $14 million in fines and settlements for environmental pollution between 2013 -2018.