The Business Benchmark for Animal Welfare (BBFAW) has rated Cerberus Capital Management-owned newcomer Albertson’s in the fifth of its six tiers, which means that the company has animal welfare “on the business agenda but limited evidence of implementation”.
In the BBFAW annual report, food companies – including supermarkets, food producers and restaurants – are divided into six tiers according to how well or badly they perform on animal welfare issues. The report rated Albertson’s for the first time.
Other companies with private equity financing included in the report include Kroger, whose investors include BlackRock and Janus Capital Management, and 3G Capital and Berkshire Hathaway-backed food business Heinz.
Established in 2012, in the wake of the UK horse meat scandal, the benchmark clearly takes the position that ignoring animal welfare is a financial risk for companies.
While many of the companies on the benchmark are privately owned, the benchmark lists brands, not private equity houses. But BBFAW has made efforts in the last year to bring more investors on board, including Coller Capital as a partner.
They have also found sponsorship from 18 institutional investors in the UK, Netherlands, France, Canada, the US and Australia, who write letters of concern or congratulations to companies at the top and bottom ends of the list.
“We haven’t spent much time with private equity because we started with the most obvious starting point which is investors in listed equity. But I think when it comes to ESG issues generally, private equity is lagging behind listed equity because they are still working out how to report on social responsibility and ESG issues,” BBFAW expert advisor Rory Sullivan told Agri Investor.
“Through our conversations with private equity, I think they probably mostly still see this as an ethical issue and have questions on its materiality, so the default is to be moderately interested but not to be very active, at least thus far. But bringing on Coller Capital is part of beginning that conversation.”
BBFAW’s reports argue that regulation, consumer concern, pressure from animal welfare organisations, and the brand and market opportunities for companies that adopt higher farm animal welfare standards make it a key financial issue.
The benchmark now looks at 90 of the world’s biggest food brands, including McDonald’s, New Zealand multinational Fonterra and Unilever.
She said that while most brands were showing improved awareness of animal welfare as a business issue, companies needed to produce more specific reporting on “key welfare issues including confinement, routine mutilations, antibiotics, cloning and growth hormones …A real effort to change can bring you up a tier.”
The 2015 report found that while 69 percent of the food companies they survey now publish animal welfare policies compared to 46 percent in 2012, many remain too broad to be convincing.
Talking to private equity houses, said Sullivan, was going to be much more difficult:
“Private equity investors may not be specialists in a particular sector. That presents a problem with houses that have multiple investments in multiple sectors at any point in time so reporting is complex.
“What we have seen is that reporting has focused on conventional financials and very aggregate measures of social responsibility like employment, carbon footprints. Within that portfolio it is hard to say that if you have 4 percent in the food sector, for example, reporting on animal welfare is a priority.
“Institutionalising reporting has to happen sector wide, so we haven’t had enough pressure in private equity to drive transparency. The other thing is that private equity institutions are going to be particularly sensitive about being listed next to publicly listed companies,” he said, adding that the BBFAW was still considering new ways to engage private equity stakeholders alongside Coller Capital.
“The BBFAW is putting animal welfare on the business agenda, and saying to companies that this is another issue you need to manage, and you can manage it in the same way conceptually as you manage all these other issues. The pressure is of course is in saying animal welfare is an issue you need to manage.”