Investment Insights Blog: Why Investors Should Care About Food, Agriculture and Biodiversity
By Ryan McQueeney
Analyst, Sustainable Investment Stewardship
Our sustainable economy framework—which expresses the need to transition to an economy that promotes environmental health, long-term prosperity for all and social cohesion—is a big picture vision that covers all sorts of economic considerations.
Sometimes these considerations seem huge, for example, how companies are upholding global human rights, or how political leaders are addressing climate change. Other times these considerations can manifest in much smaller ways—such as the individual choices you and I make daily, like what we select from our grocery store shelves, or what we order at our favorite local restaurants.
Of course, even seemingly small considerations, may have much wider reaching implications. As it relates to the food industry, while our menu choices may seem small, the systems that underpin the food industry and determine how food eventually makes it to our plates are incredibly big and far-reaching. The food and agriculture sector is a major component of the U.S. and global economies, accounting for roughly one-fifth of U.S. economic activity, $2.4 trillion in global economic activity1, and 1.3 billion jobs worldwide2. The sector is directly affected by a wide number of sustainability issues—below I have noted several examples of the many issues in the food industry that challenge the transition to a sustainable global economy:
- Approximately a quarter of global greenhouse gas emissions are attributable to agriculture and land use, with the majority of those emissions coming from livestock-created methane and manure3
- Modern farming techniques have contributed to losses in biodiversity, resulting in soil degradation that has depleted over 50% of global arable land4
- 60% of global child labor is in the agricultural sector,5 and the business faces a variety of other human rights risks, including the use of forced labor, forced resettlement of communities and indigenous peoples, and the disruption of cultures and traditions relating to food 6,7
- Globally, the majority of those in poverty still live in rural areas and rely largely on agriculture for their livelihoods,8 meaning that changes to our food and agriculture system are likely to have a disproportionate impact on the disadvantaged
The sustainability challenges related to food and agriculture create fiduciary risks and opportunities, which Wespath is seeking to address in several ways.
For starters, I am pleased to formally announce that Wespath has joined FAIRR, an international investor network focused on environmental, social and governance (ESG) factors within the animal protein and factory farming value chain. FAIRR was founded in 2016 and members today represent over $45 trillion in assets under management. The network publishes research and analysis and organizes collaborative engagements, with a focus on approximately 110 companies in the industrialized animal agriculture business. We believe it’s incredibly powerful to work with a group of like-minded investors on tackling some of the aforementioned issues.
As a member we can participate in engagements across FAIRR’s core working themes, which include sustainable proteins, working conditions and meat sourcing. We’ve already participated in FAIRR’s ongoing climate-related dialogue with JBS, one of the largest meatpacking companies in the world, and this summer we’ll be joining an engagement team focused on working conditions in the meat industry.
In addition to engagement, we have also intentionally invested in both sustainable agribusiness and sustainable forestry impact investment strategies as part of our impact investing program, which seeks the dual outcomes of market rates of return and measurable positive impact. These agribusiness and forestry strategies total more than $110 million in assets under management across several of the Wespath funds. We partner with industry leading impact-focused asset managers to design and maintain these strategies, and we believe their unique approaches to sustainability help ensure that factors like deforestation, biodiversity, and labor and human rights are considered throughout the investment process.
In closing, I, like many of you reading this, am a Wespath participant. I’m also a big foodie, and I care strongly about seeing the industry behind this passion of mine evolve more sustainably into the future. Though our current food systems need improving, I’m excited that through Wespath’s stewardship and impact program, a portion of my retirement savings are making an impact in this area!
4 Triodos Bank, Towards ecologically and socially resilient food and agriculture systems, 2019. Page 6.
7Triodos Bank, Towards ecologically and socially resilient food and agriculture systems, 2019. Page 26.