The $68 trillion-backed FAIRR Initiative has launched a world-first investor engagement addressing the biodiversity impacts of waste mismanagement and nutrient pollution from intensive livestock production.
- Investors with $68 trillion under management are asking for information on operational impact from intensive livestock producers.
- Animal waste dwarfs plastics – over three billion tonnesof waste are produced from animal farms each year, more than the volume of plastic produced worldwide.
- Not only do companies face increasing regulation, but there a significant circular economy opportunities from waste.
There is growing market awareness of biodiversity risks and their implications, particularly in the run up to the UN Biodiversity Conference (COP 15) in December 2022.
Max Boucher, Senior Manager, Research and Engagement at the FAIRR Initiative which is driving the investor engagement said: “It’s not enough to look at climate in isolation. The animal agriculture industry needs to assess risks and opportunities through a lens of nature neutrality and eventually positivity – in this case managing nutrient pollution in addition to methane emissions.”
He continued, “Investors will become increasingly demanding in this regard as initiatives like the TNFD gain traction and a global agreement on biodiversity becomes more likely.”
Dependencies on biodiversity present both risks and opportunities
According to a recent report, ‘Creating a Stink: How Manure Drives Pollution and Biodiversity Risk for Animal Protein Producers’‘, the first in a series on biodiversity. $44 trillion of economic value — or 50% of global GDP annually – is dependent on nature and biodiversity, making it critical to the economy.
Peter van der Werf, senior manager engagement at investor Robeco, said: “As a key driver of biodiversity loss globally, waste and pollution from intensive livestock production must be addressed – and this first-of-its-kind engagement is an important step forward. Around one quarter of our assets under management are either highly or very highly dependent on at least one ecosystem service – services reliant on healthy ecosystems.”
Animal waste production easily exceeds other major forms of waste and the links between industrialised farming, inadequate management of animal manure and the negative impacts of nutrient pollution on biodiversity are widely understood and accepted.
Animal waste regulations are accelerating
Many cases of inadequate management of animal manure lead to nutrient pollution that harms waterways, air quality and biodiversity, resulting in sizeable lawsuits and several examples of community opposition to farm expansion. This is leading to an increased focus on regulation to drive effective management of such wastes, representing an increasing risk to corporate operations.
Increasing regulation to tackle waste and pollution from animal agriculture is being seen around the world, including in the Netherlands, China and USA displacing supply chains and often pushing companies to increase their capital investments.
In late 2021, the Netherlands government announced a €25 billion plan to proactively buy out farmers to reduce the country’s nitrogen levels. The EU is acting on its 1991 Nitrates Directive, requiring Member States to monitor their waters and identify the effects of pollution from agriculture.
California has set a target to reduce methane emissions in dairy and cattle by 40% by 2030. More states may follow after the COP26 pledge of a 30% reduction in global emissions of the gas by 2030 and the associated White House Action Plan.
The circular economy opportunity in animal waste
At the same time, animal waste represents a significant amount of resource. Manure especially contains a significant store of nitrogen and phosphorus fertiliser. Yet, due to complexities surrounding its distribution, it is routinely treated as a waste product to be disposed of inexpensively rather than as a valuable fertiliser.
According to research from the US Environmental Protection Agency (EPA) it is rarely transported more than a few kilometres to be spread on crops, thus failing to spread to regions where there isn’t as much livestock.
Investor concern is growing and a group with $8trn AUM want answers
There is both growing risk and potential opportunity in the sector – one where, the report highlights, the volume of faeces produced by animal agriculture per year is equivalent to the faecal waste produced by twice the entire global human population. Investors are therefore asking for disclosure of a full assessment of how manure is managed in their supply chains and which concrete actions they are taking to manage the associated risks such as nutrient pollution.
The investors involved represent over $8tn in AUM, including Robeco and Aviva Investors. They plan to engage ten intensive pork and chicken producers including JBS (Brazil), Tyson Foods (US), BRF (Brazil), Cranswick (UK), Maple Leaf (Canada) and WH Group (China) – owners of Smithfield Foods in the US. This is the first in a series of FAIRR engagements targeting biodiversity, and while the engagement is still open to new investors, that will close on 21 October.
Eugenie Mathieu, senior ESG analyst & Earth Pillar Lead at Aviva Investors added: “We urgently need a collective effort from the animal protein supply chain to reduce the impact of its waste, and to build resilience against looming regulation. We urge companies to grab the bull by the horns to prevent the breakdown of global biodiversity, which would have profound economic effects on the world we live in.”
What is the FAIRR Initiative?
The FAIRR Initiative is a collaborative investor network, founded by Jeremy Coller, with a membership of $68 trillion assets under management. FAIRR works with institutional investors to define the material ESG issues linked to intensive livestock and fish farming systems and provide them with the tools necessary to integrate this information into their asset stewardship and investment decisions.
This includes the Coller FAIRR Index, the world’s first comprehensive assessment of the largest global animal protein companies on environmental, social and governance issues.