Jeremy Coller’s FAIRR initiative says factory farming is high risk

Farm Animal Investment Risk and Return (FAIRR) has published a report saying that investing in factory farming is high risk because of the spread of disease in close farming conditions.

Factory Farming: Assessing Investment Risks says that many of the risks it highlights in factory farming are often not factored in by investors. It uses the example of the outbreak of avian influenza in the US last year, saying the disease has already cost the US economy $3 billion and led 40 countries to ban the import of American poultry. Other risks it highlights for factory farming are food safety problems and climate change.

The FAIRR initiative, which produced the research, was launched in June by Jeremy Coller, well known for his impact in the secondaries investment market. The initiative, which is a network of investors that agree to follow FAIRR’s principles, has signatories including Aviva Investors and Actiam managing over $440 billion in assets. The initiative aims to make a case for animal welfare and the environment in the investment world, saying that paying attention to these issues will also lead to more reliable returns.

Published just after a UK government report calling for reduced use of antibiotics in livestock, FAIRR’s report also says that 80 percent of all antibiotics in the US are used in factory farms.

Food safety at the processing stage is also an issue that should be associated more closely with risk, the report says, pointing to the food safety scandal which hit KFC and McDonald’s last year in China when it was discovered that a processor was re-labelling meat past its sell by date. Estimated by FAIRR to have cost about $10 billion, the story is an example of how such problems can be passed on to investors.

The paper also says climate change will result in a 21 percent rise in the cost of rearing cattle, because higher temperatures will lead the animals to feel “heat stress.”

“Factory farming is a massive consumer of natural resources, emitter of greenhouse gases and tends to fast-track the spread of pandemics such as avian and swine flu,” said FAIRR founder Jeremy Coller in a press release. “It’s already impacting valuations and is a model that is not sustainable for long-term investors.”

Antibiotics, he added, were a particular danger, saying that its prevalent use was “enormously shortsighted and has led to scientists and leaders warning of threats to human health due to antibiotic overload and reduced immunity.”

“Consumers, regulators and businesses are all waking up to these risks,” he said, “and investors urgently need to up their game.”