Jeremy Coller is one of the biggest names in private equity. As founder, Chief Investment Officer and Executive Chairman of London-based Coller Capital, the firm he founded in 1990, his name is synonymous with the secondaries buyout market that the firm was key in developing.
Fewer people will know him as a committed vegan and campaigner against animal factory farming (AFF).
And fewer still as a champion of ESG.
That is about to change.
With the roll out this year of the Farm Animal Investment Risk & Return (FAIRR) campaign, Coller aims to put animal welfare on the ESG agenda, and front and centre of the United Nations-supported Principles for Responsible Investment (PRI).
ESG, he says, has become: “One of the most powerful tools in the world for change alongside legislation and social media.” Says Coller: “It’s a big statement, I know. But meaningful legislation is so difficult to enact these days, whereas capital flows were part of the major changes to apartheid in South Africa. I think if we can get action on AFF as a core value within UNPRI, or higher up on the agenda, it could change this issue profoundly.”
FAIRR is part of the animal welfare programme campaign of the Jeremy Coller Foundation, his philanthropic fund.
Its rationale is that there are significant material impacts that farm animal welfare issues can have on investor portfolios. As an example, it cites a 13% plunge in the share price of UK supermarket Tesco after a TV show revealed it stocked intensively reared chickens. By comparison, it says the revenues of US restaurant chain Chipotle rose over 23% following a campaign highlighting its use of higher-welfare meat. It says the evidencesuggests animal welfare issues present “an iceberg of risks” to investors. Its campaign says: “Above the surface, scandals such as swine flu, avian flu and horsemeat have shown how poor animal welfare and industrial production methods can lead to value destruction. But more than this we believe that under the surface there are a wide-range of risks, all linking back to poor animal welfare standards, which could damage long-term performance for investors.”
On the day RI speaks with Coller, UK newspaper front pages are dominated by a Food Standards Agency report finding that eight out of 10 fresh chickens bought from UK supermarkets during the summer of 2014 were contaminated with Campylobacter, the potentially lethal food-poisoning bug. One of last year’s hit books was Farmageddon: The True Cost of Cheap Meat, an exposé of the food industry by Philip Lymbery, Chief Executive of Compassion in World Farming (CIWF). An investigative article earlier this month in the New Yorker on chicken production and Salmonella in the US revealed that responsibility for food safety is divided among fifteen federal agencies with a different agency monitoring frozen cheese pizza than that which monitors frozen pepperoni pizza.
It’s an issue whose time in the public eye has come.
But why the ESG epiphany for Coller?
He acknowledges that he personally paid “lip service” previously.
At the same time, he points out that Coller Capital has had an ESG committee since 2011, comprising five senior managers within, notably Susan Flynn, Investment Partner. They produced a firm-wide ESG policy in 2012, and take ESG very seriously, he says, as do many of its Limited Partner (LP) clients.
And underpinning his own business perspective, he says,
have always been personal ethics: “We would never have invested in a company linked in any way to child labour, or arms and munitions, or animal welfare issues: “Way back in 1996 we were looking to do a big secondary buy out of a whole fund, Brown Shipley Private Equity, whose largest investment was an abattoir. We did the analysis, and it was a good investment. But I vetoed the buy-out because at the time I didn’t want to be financing an abattoir.” Coller argues that there are always individual and social motivations in investment: “We do not buy gambling companies. We were offered an investment in Wonga, and refused. Many people are rightly not going to invest in brothels or child labour.”
Before founding the firm in 1990, Coller’s career was spent as Head of Equity Research at Fidelity International and then at the ICI Pension Plan as a Sector Fund Manager, then Venture and Buyout Manager. He adds an anecdote from his ICI days to underline why “there is always politics in investment”, as he puts it: “When I was at ICI, I was asked to write a recommendation for investment in Eurotunnel. My advice was not to invest. I was brought in by the general manager and told to change the recommendation because the fund had been ‘asked’ to invest by the government. I didn’t like the decision at the time, but the reason the government had put pressure on us, which is not unreasonable, is that pensions don’t pay tax. Therefore there’s a strong argument they should do something for the good of the country as a quid pro quo.” Moreover, he notes that investors have changed: “I asked for a vote at an our LP meeting where there were about 100 investors. I think about 75% of them voted, and of those, 90% said values had a place in investments and only 10% said they should not. I saw similar numbers when asking the same question at a big event in Asia with more than 1000 private equity investors in the room. This is a sea change. I have spoken to CIO’s of pension plans in the US, Europe and Asia and all of them have said although they buy food in supermarkets and eat in restaurants, if they could stop their managers investing in concentrated animal farming for health or ethical reasons they would.”On a personal level, if Coller is asked to speak at an event, he insists that no animal factory farmed food is served. But he says his thinking became more systemic during 2013 when he decided to pursue his personal ambition to be instrumental in ending animal factory farming, while appreciating that having any real impact would be financially complicated. The Foundation came up with two change strategies: legislation and capital flow: “On the latter, I’d become increasingly aware that there was a possibility to shift capital flows on issues such as labour rights and pollution. The UNPRI is bringing a movement together on this. To be clear, I am not asking everyone to be a vegetarian! But I would argue that society and investors should be looking at the serious issues we are working on. One is human health and antibiotics. About 80% of all antibiotics in the US are used on animal factory farms. It’s over 50% in Europe. You cannot have AFF without antibiotics. If you keep animals in very close quarters, disease is going to spread very fast. So you feed them antibiotics every day; it fattens them up and keeps them disease free. The problem is that this leads to antibiotic-resistant bacteria, which are a threat to human and animal health. Legislation is coming out on this, and we are going to try and advance that legislation via the Foundation’s work.”
Coller says the Foundation is producing the first, major investment risk report on AFF as part of the FAIRR campaign, with both to be formally launched this summer: “We are working hard to make the new investment risk report about financial materiality, not morality.”
The Foundation has already backed the Business Benchmark for Animal Welfare, an initiative funded by Compassion in World Farming and the World Society for the Protection of Animals. It compares relevant company reporting on practices, processes and performance on farm animal welfare. Coller wrote the introduction to the 2013 report. The 2014 Benchmark report is launched in London next week (February 12).
His move into supporting ESG does not, of course, come
out of nowhere.
As well as being Chairman of his Foundation, he sits on the Boards of the Coller Institute for Private Equity at London Business School and the Coller Institute for Venture at Tel Aviv University. He is a member of the Advisory Council of The Elders, an important group of foundation heads including Richard Branson, Peter Gabriel, and Jeff Skoll.
And alongside his personal crusade on animal welfare, Coller has been a long-time supporter of making the link between vibrancy in public markets and developed social pensions systems, which he calls “the democratisation of wealth”.The role of the investment industry in supporting sustainable financial democratisation is then not so difficult to make, he says: “The old attitude of pension funds and asset managers was: our job is financial gain for the pensioners, and no other consideration. Not only that, it was deemed to be dangerous to have any other consideration, which I do empathise with, and that’s why the materiality issue is so important. On the other hand, it’s important to recognise also that the pension industry’s job in a country is a better quality of life for pensioners in old age. If you think about that, then you have to think around what that means in terms of real financial and social sustainability. Our view is that stopping animal factory farming is both a materially-relevant issue for investors and a quality of life issue!”
Jeremy Coller will be a keynote speaker at the RI Europe conference 2015: June 2/3, London – click for further details.
For further information about the next RI INSIGHT special report focusing on ESG in Private Equity please email firstname.lastname@example.org .