ESG protein index launched
A new index for investors analyses a USD300 billion group of 60 global food companies and has found that the large majority of meat, fish and dairy suppliers are failing to manage critical business risks such as greenhouse gas emissions and antibiotics risk.
The Coller FAIRR Protein Producer Index is the world’s first comprehensive assessment of how some of the world’s biggest, listed suppliers of meat and fish are managing critical sustainability risks from pollution to the Paris Agreement, food safety to worker safety.
The global ranking is produced by the USD5.9 trillion investor network FAIRR which has large investors such as Aviva Investors, Schroders and US fund University of California Office of the Chief Investment Officer of the Regents among its members.
The index aims to improve corporate disclosure on sustainability issues by all major livestock and fisheries companies and bridge the knowledge gap for investors on this sector.
The new index finds shareholder value at risk in 36 companies with a combined market capitalisation of USD152 billion which are given the worst grade (‘high-risk’) across all sustainability factors. These include Cal-Maine Foods (US), Guangdong Wens (China), and suppliers to large fast food chains such as Venky’s (India) and Fujian Sunner (China).
Human health at risk is revealed with 77 per cent of the sector failing to adequately manage or disclose antibiotic use, despite growing levels of regulation and international action to combat antibiotic resistant superbugs. Major suppliers to McDonalds and the fast food industry such as Fujian Sunner and Venky’s are among those ranked ‘high risk’ on antibiotics. One in five firms (22 per cent) also fail to show full traceability of their food supply chain – a key part of food safety.
The index also identifies Paris at risk with the livestock sector responsible for 14.5 per cent of global greenhouse gas emissions, roughly equivalent to the emissions of the entire US, but 72 per cent of the sector (worth USD175 billion) failing to manage climate risk. The index reveals that no major livestock company uses an internal price on carbon.
The index also highlights corporate best practice including Norwegian firm SalMar, praised for having a comprehensive target to reduce its greenhouse gas emissions by 10 per cent by 2020.
US meat producer Tyson Foods, which is highlighted for launching Tyson Ventures, a USD150 million venture capital fund to invest in companies such as ‘Beyond Meat’ developing plant based meats and other sustainable food products and technologies.
Norwegian aquaculture Marine Harvest – which is the top ranked company – is highlighted for its approach to antibiotics. The company tracks antibiotics usage on a gram of active substance per ton of product basis, and only uses antibiotics when fish are at risk. It aims to have ‘minimal’ use of antibiotics by 2022.
Jeremy Coller, Founder of the FAIRR Initiative and Chief Investment Officer of Coller Capital says: “Investors need ESG data and transparency to make better investment decisions, yet this information is lacking in the meat, fish and dairy sector. This is the first index to help investors bridge that knowledge gap.
“As megatrends like climate change, antibiotic resistance and food technology radically reshape the way we produce and consume meat, fish and dairy, the Coller FAIRR index will help institutional capital identify both best in class companies and potential stranded assets in the food sector.”
Imogen Rose-Smith, Investment Fellow at University of California which manages over USD120 billion of assets, says: “The multi-trillion dollar global food sector is probably the world’s biggest industry, yet investors do not have the tools to understand its risks, especially the environmental and health risks hidden in big food's labyrinth supply chains. That is why the new Coller FAIRR Protein Producer Index is a major breakthrough for investors.
“At a stroke it enables capital markets to more easily identify which intensive farming companies are adequately managing material business issues such as food safety, working conditions and environmental impacts, and which companies are at risk. It’s clear that the intensive farming sector must address its sustainability challenges with great urgency. On climate change alone, almost three quarters of the sector is failing to put in place the policies and processes required to respond to the issue's serious regulatory and operational risks. That presents serious concerns for most investors.”
Abigail Herron, Global Head of Responsible Investment, Aviva Investors says: “From fast food to fine dining, much of the food on our plates leads back to the livestock and fisheries sector assessed by this Index. That is why it is of deep concern to investors that a majority of these global food suppliers are failing to manage such significant business risks. On antibiotics alone, FAIRR’s research shows that three in four of these companies are ignoring the calls from regulators, health professionals and the financial community to manage and reduce their use of antibiotics. That failure puts both global public health and their business models at risk.”
Other findings from the new Index include:
Chinese companies score poorly on sustainability metrics. 14 out of 16 of the China-based firms assessed (87.5 per cent) are categorised as ‘high risk’. Norwegian aquaculture companies rank as the most sustainable, and European companies score more highly than those of the US or Asia.
Only five of the 60 companies accounted for the emergence and growth of the ‘alternative proteins’ sector – a rapidly growing segment of the protein sector expected to reach USD5.2 billion by 2020.