“Nothing will force businesses to change faster than the risk of their financial backing being pulled out from under them,” director at Compassion in World Farming (CIWF) USA Leah Garcés told FoodNavigator.
Factory farming, where large numbers of animals are reared in confinement in a “manufacturing style”, has boomed since the 1990s.
Factory farmed animals made up low double digit percentages of the meat trade back then, but now more than 70% of all meat in the world comes from factories, Alan Briefel, executive director of the Farm Animal Investment Risk and Return (FAIRR) initiative said in a post.
In the US, 99% of all meat is from factory farms.
“Some may see this as positive. We are feeding the world, meat is cheaper than ever, and investments in the factory farming industry have delivered decent returns over the years,” Briefel said.
“However, the risks of factory farming pose a material threat to investors and to society as a whole. (…) From pandemics to pollution, the factory farming sector is becoming a high-risk sector for investors.”
The move away from factory farming has already gained traction, with investors collectively managing more than $1 trillion joining the Farm Animal Investment Risk and Return (FAIRR) initiative, including Aviva Investors, Strathclyde Pension fund, Robeco and Triodos Investment Management.
The initiative aims to raise awareness of risks and opportunities of the factory farming model.
“Negative screening is already becoming common practice for investors. This increasingly popular approach in the investment community, where factory farming is seen as a risky investment, is no doubt going to shape the future of our food production,” Garcés added.
The risks
The shift comes as investors increasingly consider environmental, social and governance issues as part of the funding process. Issues such as climate change, employment diversity and anti-corruption are already a big consideration, Briefel said.
Factory farming is the next issue investors will look to tackle, Briefel said, noting this is the reason for FAIRR’s establishment as a group to raise awareness of risks and opportunities in the rearing model.
A wide majority of factory farms dose animals with antibiotics – 80% in the US and 50% in Europe – which is likely contributing to the spread of drug resistant human infections, according to FAIRR.
Couple this with other issues like carbon emissions, and factory farming becomes a high-risk investment, the experts said.
“The global livestock sector is responsible for more greenhouse gas emissions than the transport sector,” Briefel noted, adding: “From an investment point of view, this leaves the factory farming sector critically exposed to potential new climate legislation as we transition to a lower-carbon economy.”
Ethical issues in the way factory farmed animals live are also a big concern, Garcés added.
“Factory farming poses many risks. The most frightening risk is that factory farming threatens the future of our food,” she said.
Propped up by government bail-outs
Garcés explained that cheap grain allowed by US government subsidies means cheap feed and therefore factory farming at a low price, though often over-production is a result and further bail-outs are needed.
“When the industry fails to sell its product even with these subsidies, the government bails them out. The chicken industry for example in 2011 received a $40 million (€35.6m) bail out from the government when it overproduced and could not find a market for its product. Any other business would have had to declared bankruptcy,” she said.
“Continuing to invest in a system that needs to be propped up by government bails out and subsides, creates environment havoc, is cruel to animals, disenfranchises farmers and threaten our health is simply ludicrous. It is wasting, and destroying, precious arable land and water on producing feed for factory farmed animals, when we could be directly used those resources to feed ourselves in a more sustainable and efficient way.”
Non-factory opportunities
Briefel added that the opportunities outside of factory farming are also contributing to its declining popularity with investors.
“The next wave of a food revolution is emerging through food technology companies that are bringing together biotechnology, sensory experience and data to create affordable, sustainable alternatives to meat,” he said.
He cited California-based Hampton Creek as an example for the dairy sector, which uses plant proteins instead of eggs in its products, noting it is “on track to become the fastest growing food company in history.”
“There are other options emerging that don’t have any of those negative impacts (of factory farming), and those are the models of future investment. That’s where the buzz is,” Garcés added.