So What Do Canadian Investors Really Think About Farm Animal Welfare?
This post was written by Darren Vanstone, Rory Sullivan and Audrey Mealia.
In mid-November 2015, we presented the Business Benchmark on Farm Animal Welfare to some 20 asset managers, asset owners and investment research organisations and some 40 food companies and industry bodies, in Toronto (at events hosted by Canadian Business for Social Responsibility and supported by its communications partner the Canadian Responsible Investment Association), in Montreal (at an event hosted by Ethiquette.ca) and Vancouver (at an event hosted by NEI Investments).
Five themes emerged from these meetings and discussions:
1. Canadian investors recognise farm animal welfare as a relevant issue for the food industry. However, their views on the relative importance of farm animal welfare depend on their investment processes, on the specific companies and sectors that they are focusing on, and on the other sustainability-related issues that they analyse.
2. While relatively few investors identify farm animal welfare as the core issue for the food sector, many use companies’ management of and reporting on farm animal welfare as an indicator of the quality of a company’s wider risk management processes. For the global food companies covered by the Business Benchmark on Farm Animal Welfare, the company’s performance in the Benchmark is increasingly used as one input to a wider assessment of a company’s risk management processes.
3. Unsurprisingly given their asset allocations (and the economic importance of the food sector to the Canadian economy), Canadian investors are particularly interested in the performance of Canadian companies. This applies at two levels: the performance of Canadian companies relative to other companies, and the performance of Canadian companies relative to their global peers. The former is widely seen as important to understanding the quality of these companies’ risk management processes whereas the latter, in particular for those that are seen as good performers on farm animal welfare, is seen as a measure of companies’ ability to export and compete effectively in international markets.
4. Engagement is a core element of many investors’ responsible investment strategies. Historically, much of the emphasis has been on corporate governance and, albeit to a lesser extent, on financially material issues. This is starting to change, with an increasing number of investors’ looking to develop more coherent strategies that cover a wider range of social issues. However, the ability of investors to engage is limited by the weaknesses in corporate disclosures on these issues. Farm animal welfare is typical in this regard, with most Canadian food companies providing limited information on their policies or implementation processes.
5. Investors see overarching farm animal welfare policies and commitments on issues such as close confinement as important first steps in managing farm animal welfare. Investors commented that many North American food companies have made commitments on farm animal welfare but have failed to provide any information on how these are implemented or on the outcomes that have been achieved. This lack of meaningful performance reporting is often seen by investors as a sign that companies simply do not have the capacities or competencies necessary to manage sustainability or wider business risk issues effectively.
In conclusion, Canadian investors have an important role to play in encouraging companies to establish and implement credible farm animal welfare policies, although their ability to deliver on this is limited by the quality of the disclosures being provided by companies. In that context, encouraging companies to provide better disclosures on their farm animal welfare-related policies, practices, processes and performance is the immediate priority for investors and other stakeholders looking to improve corporate practice and performance on farm animal welfare.
About the authors: Darren Vanstone is Corporate Engagement Manager for World Animal Protection (Canada), Dr Rory Sullivan is Expert Advisor to the Business Benchmark on Farm Animal Welfare and Audrey Mealia is International Corporate Engagement Manager for World Animal Protection (Global).
The Business Benchmark on Farm Animal Welfare has produced a disclosure guide for food companies. See http://www.bbfaw.com/wp-content/uploads/2015/05/Investor-Briefing-No-18-Farm-Animal-Welfare-Disclosure-Framework.pdf