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AnimalFactoryFarming:Killerstatsinvestorscan’tignore
JeremyCollerCIO,CollerCapital
III.AcceptanceII.ViolentOpposi1onI.Ridicule
1988–Swedenbansba=erycages2013–Gesta?oncratesbannedintheEU2015–CaliforniaEnactsStrictestAnimalAn?bio?cLawintheUS
Beginningofthejourneytoacceptance
Slavery
Women’sRights
GlobalWarming
186513thamendmentoftheUSCons?tu?on
Today–slaveryisillegalacrosstheglobe
1919USWomen’sSuffrageAmendmentToday–widespreadsupportforequality
AnimalFactoryFarming
2005KyotoProtocol
Today–globalwarmingisanissue
“Awomen’splaceisinherhome”
An?-Suffrage=epostcard,late19thcentury
“Globalwarmingisascam,perpetratedbyscien1sts”
Mar?nKeeley,Geologist,2004
“Idon’tknowwhoaskedthesowifshewantedtoturnaround”
Na?onalPorkProducersCouncilUSonuseofcruelgesta?oncrates,2012
“Ihaveenduredagreatdealofridicule”
AbrahamLincoln,1863
Source:FAIRRresearch
Animalfactoryfarmingisthreateningglobalsustainability...thisisnotaboutvegetarianism
Thethreestagesoftruth
2
Factoryfarmingisanewphenomenon
Factoryfarminghasexplodedontheworld…99%ofallmeatconsumedintheUSisfactoryfarmed;63%intherestoftheworld
Source:¹FoodandWaterWatch,2012;²UNFAO,2013;³UNFAO,2012
Factoryfarmedpigs(US,%)¹
GlobalanimalpopulaTon1993–13billion2013–23billion(+77%)²Onaverage,thereare3chickensperperson²1980–9%of consumedcomesfromfishfarms
2013-50%³ofconsumedcomesfromfishfarmsThesenumbersareprojectedtoincrease….
30%
97%
1992
2013
3
Thefourinconvenienttruths
Factoryfarminghasexplodedontheworld…99%ofallmeatconsumedintheUSisfactoryfarmed;63%intherestoftheworld
1
Threatenshumanhealth
2
ContributestoglobalwarmingandpolluTon
3
Endangersfoodsecurity
4
Consumesourplanet’sscarce
resources
4
1
3
2
4
ThreatensHumanHealth
#1UseofAnTbioTcs-Worldwide
• 80%ofallan?bio?csintheUSareusedonfarmanimals;65%inEurope
• LastResortAnTbioTcs:ColisTnResistanceFoundScien?stsdiscoveredbacteriaresistanttothedrugoflastresortinpa?entsandlivestockinChina,EuropeandUS
• Increasedfrequencyofanimalepidemics
Sources:CDC,2012;TheGuardian,18June2015;CDC2013,FDA.gov;Na?onalResourcesDefenseCouncil(NRDC);TheAlliancetoSaveOurAn?bio?cs,2011;PNAS,2015 5
1InconvenienttruthHumanHealth
• Thelivestocksectorproduces14.5%ofglobalgreenhousegasemissions,morethanthetransportsector(13%);thisincludes
• 39%ofmethaneemissions
• 65%ofnitrousoxideemissions
• 130xmoreanimalwastethanhumanwasteisproducedintheUS
ContributestoGlobalWarmingandPollu?on
TheirreversibleTppingpointofglobalwarmingisfastapproaching
Sources:ChathamHouse,2014;ChathamHouse,2014andFAO,2013;EnvironmentalIntegrityProject,2011;WorldWatch,2009;UnitedStatesEnvironmentalProtec?onAgency(EPA) 6
2InconvenienttruthClimate
EndangersFoodSecurity
ProteinconsumpToniscrowdingoutcaloriesforpeoplelivingatsubsistencelevel;diverTngsomeresourcesfromanimalstohumanswouldfeedtheworld
Sources:AmericanJournalofClinicalNutri?on;UNEP,2009;www.fishcount.org.uk;PNAS,2013;FAO,IFADandWFP,2014;UniversityofMinnesota,2013
Thenewphenomenoncan’tfeedtheworld…
• Atleastonethirdoftheworld’sgrainharvestisfedtofarmedanimals
• Onaverage,ittakesaround6kgofplantproteintoproduce1kgofanimalprotein
• 4kgofwildfishareusedasfeedtoproduce1kgoffarmedsalmon
7
3Inconvenienttruth
FoodSecurity
Source:FAOSTAT,2015;JCFanalysis
Percen
tchange(1961=100)
50
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Cerealsforanimals
PopulaTon
Cerealsforhumans
Arableland
MeatProducTon
1960s 1970s 1980s 1990s 2000s 2010s
AnimalsnowoutcompeTnghumansforcerealsWithroughlythesameamountofarableland,cerealshavebeendivertedfromhumanstoanimals
320%
230%
130%
60%
8%
TheGreenRevolu?on
FactoryfarmingisafalsesoluTon…itcannotfeedtheworld
8
ConsumesOurPlantsScarceResources
#1useroffreshwater;#1causeofdeforestaTon
Sources:FAO,2003and2006;WWF,2014;CIWFandWSPA,2012;Ins?tuteofMechanicalEngineers,2013;Es?matedwithdatafromWHO/UNICEFJointMonitoringProgrammeforWaterSupplyandSanita?on,2012
• Es?matedlitersofwaterrequiredtoproduce100caloriesof…
• Animalagricultureisresponsibleforupto91%ofAmazondeforestaTon
Beef
Pasta
Potatoes
1,000+
56
38
9
4InconvenienttruthPlanet’sResources
Thefourinconvenienttruths…Thefourhorsemenoftheapocalypse
FOODSECURITYGLOBAL
WARMINGPLANETSRESOURCES
Animalfactoryfarmingisthreateningglobalsustainability...thisisaboutmateriality,notmorality
10
Asaninvestor
Asanindividual
Asauniversity/businessleader
• Makeimpactinvestments
• ReviewandbecomeamemberoftheFAIRR(FarmAnimalInvestmentRisk&Returns)Ini1a1ve(www.fairr.org)
• Influenceyourbusinessprac1ces–forexample,VirginAmericaonlyservescage-freeeggsaboardtheirflights
• Improveyourcateringpolicy–ensurethatnofactoryfarmedfoodisservedforinternalcateringandevents;implementa‘MeatFreeMonday’policy
• Refineyourdona1onsandspeakingengagementspolicy
• Asaconsumer,makethechoicetobuyhigh-welfaremeat,eggsanddairyandreduceyourmeatconsump1on
• SignuptotheFAIRRnewsleher
Ifuniversi?esandpowerfulinvestorsarenotonthecurngedge,whowillbe?
11
12
Whatdoesthismeanforinvestors?
For example, Hallmark/Westland, a California-based meat packing company.
In 2008, evidence of animal cruelty and health concerns forced the company into the biggest meat recall in US history: 65 million kilograms, equivalent to the weight of 195 jumbo jets. The recall cost $116 million. But the resulting health and safety class-action forced them into bankruptcy in 2012.
Andtherearelargepublicexampleshiddeninplainsight…
13
Investmentrisksinthefastfoodindustry
Risksforinvestors
UnderperformedtheMSCIIndexby97%
Casestudy
Sources:GoogleFinance,Chipotle.com
MSCIIndex
PricinginvestmentriskPricinginvestmentrisk
2016
MeatcompaniesgoanTbioTcs-freeasmoreconsumersdemandit
03.11.2014
AretheretoomanyanTbioTcsinyourfastfoodmeat?
22.09.2016
TysontoenduseofhumananTbioTcsonchickensby2017
28.04.2015
CaliforniaEnactsStrictestLawLimiTngAnTbioTcsinLivestock
12.10.2015
Consumers BusinessesPolicymakers Investors
?
Knowledgegap
28.04.2015
SalesofanTbioTc-free&organicchickenhaveincreased25%&33%y/y,respecTvely*
Investmentriskshiddeninplainsight
*Year-end2015asperIRI,Chicago-basedMarketResearchFirm
21.09.2016
U.N.PledgesToFightAnTbioTcResistanceInHistoricAgreement
Consumers,policymakersandbusinessesarestarTngtoact...Investorsshouldtoo
14
15
Investmentrisksandopportuni?esinthepoultryandeggindustry
$3.3bnoverthefirst6monthseconomiccostduetoUSavianfluoutbreak,
represen?ng6%ofthe$50bnUSpoultryindustry
Governmentbillincludingcleanup=
$700m
Risksforinvestors OpportuniTesforinvestors
ReplacingeggsinmayonnaisereducespricevolaTlityinkeyinputs
Risks&
Opp
ortuniTe
sforIn
vestors
Casestudies
Theworld’slargestfoodcateringcompany,serving8millionmealsadayintheUSalone,haswalkedawayfromthe
mostcommonlysoldmayonnaiseintheworld
Sources:GoogleFinance;Na?onalGeographic,15July2015;USDAAgricultureSecretaryTomVilsack,July2015;CompassUSApressrelease,February2015
ClaraFoods
Eggwhites
BeyondMeatBeefandchicken
PerfectDay
Milk
HamptonCreek
Mayonnaise,cookiesandeggs
ImpossibleFoods
Meat
ClearLabs
Foodanalysis
MemphisMeats
Beefandpork
Gelzen
GelaTne
BoltThreads
Silk
ModernMeadow
Leather
KiteHill
Cheese
Sunfed
Chicken
ImpactInves?nginfoodandmaterialstechnology
ImpactinvestmentswiththeobjecTveofreducingdependenceonanimals
16
FarmAnimalInvestmentRisk&ReturnIni?a?ve
Asinvestorswecareaboutthebohomline–havewepricedrisk?
1. Acollabora?venetworkbyinvestors,forinvestors.
2. Withanobjec?vetoclosetheknowledgegap.
3. It’saboutmateriality,notmorality.
4. SincelaunchinDecember,morethan$1.5trillionofAUMjoinedtheFAIRRnetwork.
Byjoining,youcanbeanearlyadoptertopricethisrisk
17
FAIRRisahubbyinvestorsforinvestors
CasestudiesInvestmentriskreport Benchmark
InvestorCollateral
v AskyourESGresearchproviderstoiden?fymetricsandprovidedataonthisrisk
Internalriskmanagement
DirectEngagement
v Directdialoguewithcompanymanagementontheseissues
v Collabora?veengagementwithcompanies
Bridgingtheknowledgegapforinvestors
AcTveStewardship
18
28ESGrisks Transparencyonsupplychains
Prac>calhelpbyinvestors
forinvestors
FAIRREngagementwithInvesteeCompanies(April2016)
AnTbioTcsengagement–backedby$1.5trillionAUM
• Targe?ng10ofthelargestglobalfastfoodcompanies
• AddressingtheexcessiveuseofanTbioTcsinlivestockproduc?on
• 60investorsignatoriestodate,with$1.5trillionAUM
CurrentStatus
• 8ofthe10companieshaverespondedandareindirectdialoguewithourteam
• Companieshavealreadygivenconcretepubliccommitments:60insTtuTonalinvestorswithover$1.5trillionAUM
19
An?bio?csengagementlaunch(April2016)–presscoverage
‘Systemic’an>bio>cscrisistroublesbig
investors’
‘Investorgrouplaunchescampaigntocurban>bio>cuse’
‘BiginvestorspushMcDonalds,Yum!andDomino’stodrop
an>bio>cs’
‘Foodcompanyinvestorsdemandan>bio>creduc>on,
now!’
‘Investorsurgefastfoodandpubchainstoacttoreducefarm
an>bio>cs’
‘Investorgrouplaunchescampaigntocurban>bio>cuse
infood’
52arTclesinmajorpublicaTonsacross15countries
20
InvestorEngagementonSustainableProtein(Sept2016)Companytargetsforsustainableproteinengagement:
SustainableProteinEngagementlaunched
• 40signatoriestodate,with$1.25trillionAUM
• Targe?ng16internaTonalfoodcompanies
• Addressingthematerialriskstothelivestockindustryposedbythefourinconvenienttruths
• Highligh?ngtheopportuniTespresentedbythegrowingmarketforplant-basedproteins
MiTgaTngclimateriskandbuildingresilientsupplychains
21
InvestorEngagementonSustainableProteinlaunch(Sept2016)–presscoverage
‘InvestorsurgefoodcompaniestoshiKfrom
meattoplants’
‘APfunds,Nordea,Folksamtakeaimatfoodcompaniesonmeatrisk’
‘We’readdictedtomeat.Andit’sdestroyingthe
planet’
‘GlobalInvestorsPushForaProteinShake-up’
‘InvestorsurgefoodcompaniestoshiKfrom
meattoplants’
‘Walmartandothersarebeingaskedtostopsellingasmuchmeat’
SustainableProteinengagement-backedby40investorswith$1.25trillionAUM
22
FAIRRIniTaT
ve–Geq
ngIn
volved
BridgetheknowledgegapReducerisk
JointheFAIRRIniTaTve
www.fairr.org
23
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