Analysis of an investor campaign: how we reached a tipping point on farm animal welfare

Investor relevance, regular updates/comparisons and sustained engagement is key.

The Global Investor Statement on Farm Animal Welfare now has 21 signatories representing over £1.7 trillion in assets under management; evidence that farm animal welfare is increasingly seen as an important investment issue for the food sector. When we launched the first Business Benchmark on Farm Animal Welfare (BBFAW) report at the beginning of 2013, animal welfare was at the margins of RI debates. It was rarely identified as a relevant ESG issue, even for investors in the food sector. Some three years later, things have changed. The signatories to the Statement state that farm animal welfare is potentially material to long-term investment value creation in the food sector, and they commit to taking account of farm animal welfare when analysing food companies and to encouraging high standards across the food industry. A further nineteen investors are involved in a BBFAW-convened collaborative engagement programme directed at encouraging companies to improve their practices and processes on farm animal welfare. Finally, well over one hundred investment institutions – asset owners, asset managers, insurance companies – across Europe, North America and Asia-Pacific have contributed to BBFAW consultations, surveys and roundtables on farm animal welfare.
What has driven this change? In part, of course, it is due to external factors and events; the European horsemeat scandal – which broke just days before BBFAW launched its first report – put supply chain-related risks and opportunities on the agenda of food sector investors. Other drivers have included tightening regulatory and labelling standards, consumer willingness to pay a premium for higher welfare farm produce, media and NGO campaigns focussing on the farm animal welfare practices of high profile retailers, producers and restaurants, and wider debates about the human health risks linked to food.
While a necessary first step, we know that it is not enough for investors to acknowledge that an issue may be financially material. Prior to 2013, investors’ ability to integrate farm animal welfare into their investment research and decision-making was constrained by weaknesses in corporate disclosures on farm animal welfare and by the lack of a standardised framework or assessment tool that could be used to make meaningful comparisons between companies’ practices or performance. BBFAW sought to address these issues by providing investors with a standard framework against which they could assess global food companies on their farm animal welfare practices, processes and performance. However, delivering change is not simply a matter of publishing reports and rankings.The interesting question is how has BBFAW succeeded in getting farm animal welfare on the investment agenda? In our view, there are four reasons. The first is that BBFAW has always sought to be a tool for investors. For example, the BBFAW assessment framework – policies, governance, objectives and targets, management systems, performance – aligns with the way in which investors analyse and assess companies’ practices and performance on other ESG issues. In addition, investors can access online individual company reports that provide an assessment of a company’s strengths and weaknesses, that analyse trends in company performance, and that discuss a company’s engagement with stakeholders on the issue of farm animal welfare. The second is that the BBFAW benchmark has transparent and robust assessment and review processes, and is based on objectively assessable indicators. This means that investors can rely on the results. The third is that the Benchmark is repeated annually; in fact, we are now into the fifth iteration, with the next report to be published in January 2017. The reality is that until benchmarks (or campaigns more generally) get to this level of maturity, most investors will assume – often correctly – that the issue will soon disappear as the supporting organisations move on to other issues. Furthermore, the fact that the Benchmark is repeated on an annual basis is critical. Investment decision-making is as much about understanding trends and changes in performance as it is about assessing exposure and risk at a defined point in time. This is particularly important when monitoring progress on an issue such as farm animal welfare, which has not until recently received anywhere near the same degree of management attention as other ESG issues. The annual Benchmark results allow investors to understand whether companies are improving, stagnating or getting worse and whether they are responding to engagement. The fourth is that the BBFAW programme involves extensive outreach across the investment industry. BBFAW has actively engaged with the sell-side and with responsible investment research organisations to raise awareness of farm animal welfare and to encourage them to pay attention to the issue in their research processes and client advice. It has published numerous articles and reports on farm animal welfare and related issues. And it has coordinated and convened investor collaboration. The creation of a tipping point is not just about a single headline event or the publication of a glossy report. Rather, it is about the creation of sustained, consistent pressure over a period of time. This pressure amplifies events and catalyses small changes which can then manifest themselves in much larger ways. Ultimately, BBFAW has delivered change within the investment community by presenting farm animal welfare in terms that are relevant to investors, by aligning with investors’ interests, and by removing the real or perceived barriers to investor action.

Dr Rory Sullivan is Expert Adviser to the Business Benchmark on Farm Animal Welfare and Nicky Amos is the Programme Director of the Business Benchmark on Farm Animal Welfare.
The Business Benchmark on Farm Animal Welfare (BBFAW) is supported by Compassion in World Farming, World Animal Protection and Coller Capital.