Farm animal welfare as an investment issue

Abstract

Farm animal welfare is an increasingly important issue for companies across all sectors of the food industry – be they retailers, service companies, manufacturers, processors or producers. This has been driven by a range of factors, including regulation, consumer concern, pressure from animal welfare organisations on food business companies and their investors, retailers expecting their suppliers to comply with corporate responsibility policies, and the brand and market opportunities for companies that adopt higher farm animal welfare standards. Yet, despite these drivers, farm animal welfare as a management issue is relatively immature. While some of the more progressive farm animal welfare NGOs have worked with companies to raise awareness and develop appropriate practices and tools, there is still a lack of consensus around how companies should manage farm animal welfare-related issues. Investors are starting to play a more active role as they begin to recognise such issues may represent potential financial risks and opportunities for companies they invest in. A number of ethical (screened) retail funds – such as those in the UK and USA – explicitly consider farm animal welfare issues, and some investors have started to engage with companies to improve their performance and reporting on farm animal welfare. NGOs are beginning to engage with investors and it is possible that this will, over time, result in investors paying more attention to the quality of companies’ management of farm animal welfare issues which, in turn, should contribute to improved practices on the ground. The aim of this briefing paper is three-fold: (i) to explain how investors look at non-financial, or environmental, social and governance (ESG), issues in general in their investment processes, (ii) to analyse how they approach and consider farm animal welfare issues, and the obstacles faced in making farm animal welfare a more ‘mainstream’ investment issue, (iii) to explore and consider how the debate is likely to evolve over time.