Farm animal welfare - an ongoing investment issue

The welfare of farm animals has long been a concern for ethical investors. Rathbone Greenbank has sought to implement clients’ concerns on the ethical treatment of animals ever since it started offering an ethical investment service. However, in recent years, it has been gaining momentum as an investment issue in its own right.

While companies in the food production and foodservice sectors depend heavily on animal products in their supply chains, many have only recently begun to address the management of animal welfare standards as a core strategic risk. Corporate benchmarking exercises, like the Business Benchmark on Farm Animal Welfare (BBFAW) are helping to raise this issue with company managements in an effort to drive improvements in performance.

Rathbone Greenbank has supported BBFAW since its inception in 2012, and was part of the investor steering group which was consulted on its original methodology. The third annual benchmark was launched in London in February 2015, and Rathbone Greenbank representatives were present to hear its latest findings.

BBFAW looks at the performance of 80 global companies exposed to the food supply chain including retailers, wholesalers, restaurants and bars, and producers. It measures performance in 23 distinct areas, covering general management and the approach to specific issues such as the live transportation of animals. In doing so, it assesses information available in the public domain, in order that companies are incentivised to improve transparency through greater disclosure.

In recent years, BBFAW has focused predominantly on matters of policy and governance. However, in 2015 it began to look at indicators of performance in order to advance the issue and drive actual improvements in farm animal welfare outcomes. Companies are increasingly aware that demonstrating progress on animal welfare issues can create additional value as a result of both closer control of their supply chains and through enhancement of their brand and reputation.

BBFAW leaders in 2014 are familiar names in the ethical business world with Waitrose and Marks & Spencer scoring well. Despite the fact that overall performance generally remains weak across the whole range of companies assessed, some 45% of companies have moved up at least one tier since 2012.

Farm animal welfare continues to be a systemic risk for these companies as gaps in management of the issue creates risks. The major areas of weakness which BBFAW is finding are around quality of management. While there has been a marked increase in the quantity of reporting, this has led to more ‘greenwash’ with a failure to support high-level statements with specific details.

BBFAW will continue to assess companies and their approach to the management of this issue. As it does so, it is creating the right framework of incentives for companies to be more active.

As investors, we are very supportive of the benchmark and frequently make companies aware that we use the rating in our assessment of their suitability as ethical investments. Companies are thereby encouraged to dedicate time and resource to the management of farm animal welfare matters, while investors receive a clearer picture regarding the risks involved in a particular business.

Matt Crossman, ethical research and corporate engagement