Follow The Money, Part 2: Divestment From Factory Farms
In my previous blog, I looked at recent marketplace trends related to the development and sale of plant-based alternative proteins, as well as investment in plant-based food companies, start-ups, and innovations.
Much less prevalent in the investing world is a small but growing movement to withhold investment dollars from companies that participate in factory farming. This trend is part of a much larger phenomenon known as socially responsible investing (SRI). SRI has steadily gained interest among investors of all types, but particularly among younger investors. Investors focused on SRI tend to be particularly sensitive to a category of factors called environmental, social, and governance (ESG) issues, and investment professionals screen potential investments according to standards related to the causes that most interest them.
Those leading the charge to make divestment from factory farming a reality see parallels with the fossil fuel divestment movement, which has seen hundreds of institutions commit to pulling their money from coal, oil and gas companies. One of the main tactics that activists for factory-farming divestment use is to alert investors to the financial risks of factory farming, including risks of disease outbreak, extreme weather, swings in the price of feed, bans or fines in relation to water pollution, and future legislation related to methane emissions and/or antibiotic use.
To move the needle on factory-farming divestment, demand needs to come from the bottom—individual investors seeking to avoid these investments—but also from large institutional portfolios being managed by professional investors. The most prominent effort to date among institutional and professional investors is the Farm Animal Investment Risk and Return (FAIRR) initiative, a collaborative network consisting of over 170 funds with a current total of around $20 trillion in assets under management (ten times the size compared to when the initiative was founded four years ago). It is not clear how many of these firms are actively divesting from factory farming. Most of those who have signed up to the FAIRR initiative are only committed to engaging the issues and working to find out more.
Set up in 2015 by private equity millionaire Jeremy Coller, FAIRR provides resources about factory farming risks and information on what companies participate in relevant factory-farming activities.
A smaller organization called Pivot Food Investment seeks to convince investors to divest from factory farming using strategies of media engagement, institutional outreach, and investor education. They frame their appeal as “a movement” and seek interaction with anyone who is interested in influencing their educational institution or employer to divest.
Besides FAIRR and Pivot Food Investment, a small but growing number of firms that manage the investment portfolios of foundations, education or other institutions, or high-net individuals specifically call out that they avoid investments in companies that engage in factory farming. The following investment firms and brokerage platforms are included in that group.
- Boston Common Asset Management: Does not invest in companies who primary business is CAFO (concentrated animal feeding operations).
- Clean Yield Asset Management: Clean Yield screens out all companies materially involved in the following areas: [of 14 areas, four are related to animal welfare] Animal testing (beyond legal requirements), fur production, abuse of animals for entertainment, and factory farming.
- Folio Investing Brokerage: Allows users of the brokerage platform to exclude companies that the Humane Society of the U.S. has deemed particularly laggard in their treatment of farm animals.
- Rocky Mountain Humane Investing: Screens and eliminates companies involved in factory farming, animal testing, and animals as entertainment; also weapons, fossil fuels, and tobacco.
- Trillium Asset Management: “Trillium seeks to avoid investing in companies that are involved in cruel and unnecessary abuse of animals. We monitor corporate practices and policies related to farmed animals’ living conditions, humane slaughterhouse practices, animal testing, the sale of fur, and the sponsorship or use of animals in entertainment noted for their cruelty to animals (such as bullfights or rodeos).”
Individual investors who are not venture capitalists, do not have an SRI-oriented professional managing their portfolio, and do not buy individual stocks have only a few investment options for explicitly avoiding companies engaged in factory farming. Among the hundreds of available publicly traded socially responsible funds, there are few that state categorical exclusions of any specific industries, and, when they do, the most common exclusions are weapons and tobacco, followed closely by fossil fuels and gambling. I found two “exchange-traded funds” (ETFs—similar to mutual funds but with some differences), that explicitly avoid investment in factory farming.
The first is the U.S. Vegan Climate Fund (traded on the NASDAQ exchange as VEGN). According to the fund’s prospectus, it aims to “address the concerns of vegans, animal lovers and environmentalists by avoiding investments in companies whose activities directly contribute to animal suffering, destruction of the natural environment and climate change.” The second is the Green Century Balanced Fund (GCBLX). The Fund excludes factory farms as well as fossil fuel companies, nuclear energy or weapons companies, companies in the civilian firearm, military weapon, or tobacco industries, or organizations that deal in GMOs (genetically modified organisms).
A few mutual funds do not wholly shun factory farming-related concerns, but are at least explicit about some related exclusions. The DFA Global Sustainability Fixed Income Portfolio (DGSFX) and DFA Social Fixed Income (DSFIX) “generally exclude” investment in companies cited for rearing livestock using particularly intensive methods. Calvert, creator of Calvert Funds, applies principles that “generally preclude investments” in companies that “abuse animals, cause unnecessary suffering and death of animals, or whose operations involve the exploitation or mistreatment of animals.”
It is highly unlikely that the funds noted above are offered through employer-sponsored 401(k) or other retirement programs, which usually offer only a small array of large funds from well-known financial services corporations. But individuals can lobby their employer to consider adding one of these funds as a choice or can invest in the funds with post-tax dollars.
In New Zealand, the government-sanctioned retirement savings programs called Kiwisavers (similar to 401(k)’s and IRA’s in the U.S.) has spawned a number of socially responsible options. One variation is “Caresaver,” an ethics-oriented fund with exclusions on factory farming, tobacco, fossil fuels, civilian weapons, gambling, whaling, controversial weapons, inequality, animal testing, and adult entertainment.
Similar to the status of venture capital investment in plant-based companies, divestment from factory-farming is a small but growing movement. The dynamic of investors asking for the option and professionals inventing solutions is similar to consumer demand for alternatives to animal-based food and the industry giving them what they ask for. It seems that there is room for doing the right thing while making money on Wall Street.
Implications for Animal Advocates
The last two years have been phenomenal in terms of increased investment in plant-based enterprises, the launch of new brands, products, and restaurant offerings, and divestment from factory farming. Many advocates who want desperately for animal suffering to end may still feel it’s moving too slowly. It’s difficult to accept that the food industry moves incrementally. But consumer tastes tend to evolve slowly, and scaling a food business cannot be done in a few months. These businesses are not a new dating apps or video-sharing platforms.
It might feel good to disparage meat companies’ efforts to cash in on the plant-based trend because they market the new products under the banners of “protein” and “sustainability,” with no mention of animal lives or animal treatment. I’ve read any number of angry social media posts over the years when a large non-plant-based company buys a smaller plant-based company. Should we vegans continue to buy the plant-based product? Or is that tantamount to supporting a big company that exploits animals?
For me, it’s analogous to being an activist for ending a horrible war. What if the leaders of the two sides finally decide to end the war, but the rationales in their press releases don’t match my arguments for ending the war? I’m not going to mount a new protest demanding they only stop if it’s for the right reasons. If plant-based foods can benefit from the physical and commercial infrastructure these large animal-food companies already have, I say hooray. This is how change happens in the business world—not with public soul-searching and a sudden 180° turn. They have to hedge their bets and continue to deliver value to their shareholders. Many of these century-old companies have reinvented themselves several times, but each time it takes some years. The next reinvention for some of them, which might take some time to achieve, may very well be as an exclusively plant-based food company.
Animal advocates can spread the word about divestment and investment options. They can encourage meat-eaters to try plant-based proteins, even if one’s own preferred plant-based foods are less processed and healthier. They can resist fighting over issues in public that might distract from the direction of the trends I’ve described.
One of my favorite quotes is from Martin Luther King, Jr. “The arc of the moral universe is long, but it bends toward justice.” My dream would be to see the people of the world wake up to the horrible injustice of the factory farming system. The word “arc” suggests a smooth, neat curve. What we see in the progress toward meat reduction is messy and confusing. But to me, the trends covered here give real hope.