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From farm to fork, the world’s food system generates 25-30% of global greenhouse gas emissions, with the five largest livestock industry players – JBS, Tyson, Cargill, Dairy Farmers of America and Fonterra – together emitting more than ExxonMobil. If the climate impacts of the sector were not yet enough to spur investor action, the Covid-19 epidemic has thrown the social and societal impacts of an obscenely unsustainable sector into sharp relief.
35 of the world’s largest meat and dairy companies continue to have the backing of over 2,500 banks, pension funds and investment managers
Slaughterhouses with historically poor labour records have been hit hard by coronavirus – and, advocates argue, violated the civil rights act by failing to protect their predominantly black, Latino and Asian workforce. The pandemic also refocused attention on pig and chicken factory farms, which are generating mutated viruses that may jump from animals into forms that harm humans. It is these viruses that human immune systems are unfamiliar with and that can prove most deadly as pandemics. The risks are clear. But from the scale of investments made by the world’s banks and investors – via equity and bond markets and direct lending – one would think it is a low-risk investment proposition.
Our latest research, underpinned by data from Profundo, found that the 35 of the world’s largest meat and dairy companies continue to have the backing of over 2,500 banks, pension funds and investment managers. Over the five years between 2015 and 2020, global meat and dairy companies received close to $500bn in support. For investors in the PRI signatory pool, and all those who have publicly pledged to incorporate climate change and associated systemic risks into their investment decision-making process, coronavirus should be the catalyst to wind down financial support of these businesses.
The game of musical chairs continues in the livestock sector
For now, the money taps are still flowing, with none of the sector’s financiers willing to step up and call time on this dangerous industry. The extent of investor myopia to risk in the sector is simply startling.
In April 2020, around 3,000 investors continued to back the world’s 35 largest meat and dairy corporations to the tune of $228bn in equity capital. Despite meat and dairy representing less than 1% of total assets under management, Blackrock, Capital Group and Vanguard’s size mean that they are meat and dairys’ largest shareholders, while Allianz joins Blackrock and Vanguard to round out the top three bondholders. Rabobank, which according to its website “focuses explicitly on sustainability in livestock farming”, has loaned $5.7bn to meat and dairy companies with a combined emissions footprint of 727 million tonnes of CO2 equivalent a year.
ESG stewardship teams, even at the largest asset managers like BlackRock and NBIM, do not appear to have the capacity to engage with these companies. And even if they do, it is unclear what the ask would be for corporations so structurally incompatible with the Paris Agreement. Meanwhile, engaged bond investors are a rare species. As the human and climate risks linked to the sector grow more acute, investors should send a clear signal with divestment.
Path dependency of the Big Livestock business model will destroy long-term shareholder value
Peak livestock – when livestock production reaches its peak and is consequently reduced due to factors beyond the control of the producers, such as pandemics, lower demand, and climate change disruptions – will arrive in the next decade, according to researchers led by Helen Harwatt, a fellow at Harvard Law School. In a December 2019 letter to the Lancet Planetary Health journal, the researchers call on countries to “declare a timeframe for peak livestock”, after which production would not increase.
Big Livestock – the largest global companies profiled in our analysis – are seemingly ignoring reality and proceeding with business-as-usual. By locking the world into a future dominated by high-impact industrial meat and dairy production, these companies and their investors are risking pestilence, species extermination and climate breakdown. It is time for responsible investors to wind down this obsolete industry, with action to divest and defund the largest operators. While quarterly dividends might continue this year, keeping the sector going through the 2020s will lead to shareholder value destruction alongside climate breakdown and new pandemics.
Talk is cheap and incremental engagement has failed to change business practices
Responsible asset managers, like BNP Paribas Asset Management, boast of commitments to net-zero portfolios and net-zero deforestation through the groups such as the Soft Commodities Compact. But it is time to get serious about stopping the flow of investment and financing to the sector.
In a business-as-usual scenario, the livestock and dairy sector will account for almost half (49%) of the world’s emissions budget for 1.5°C by 2030 and 80% by 2050. Given the sector’s inability to meaningfully decarbonise or address systemic health and climate risks built into their business model, the companies look like risky bets. Time to divest from industrial livestock and dairy, starting with the companies listed below. Humanity is watching.
Carina Millstone is Executive Director of Feedback, a campaign group working to regenerate nature by transforming our food systems.