Q&A: How FAIRR tracks animal protein ESG performance

Before FAIRR, investors did not realize the relevance of the global protein sector’s impact on climate change.

Thalia Vounaki

The agriculture sector accounts for 18 percent of all greenhouse gas emissions. Yet Farm Animal Investment Risk & Return (FAIRR) research shows that 82 percent of the world’s biggest meat and dairy producers don’t even track these emissions, let alone have specific plans to reduce them. Similarly, 86 percent of major meat and dairy suppliers fail to declare or set meaningful reduction targets for their GHG emissions.

For these reasons, PE heavyweight and passionate vegan Jeremy Coller decided in 2019 to launch the Coller FAIRR Protein Producer Index, which tracks the world’s 60 biggest animal protein producers, worth a combined $363 billion, measuring their ESG performance. Thalia Vounaki discusses the index and the issues facing agri.

Why did Jeremy Coller set up the FAIRR Index?

Before FAIRR, there were many ESG blind spots when it came to intensive animal agriculture, and so investors really didn’t understand the relevance of the global protein sector from an ESG perspective. As a result, FAIRR was launched to fill this knowledge gap.

How does the index look to break new ground? What are its aims?

The Coller FAIRR Index is a barometer for how the world’s biggest producers perform against the nine most important risk factors and one opportunity factor. It assesses how the 60 largest publicly listed animal protein producers perform on issues such as greenhouse gas emissions, deforestation, water scarcity, waste pollution, antibiotic usage and investment in alternative proteins.

The index also enables us to highlight the opportunities for investors within the sector, for example, alternative proteins. And so, when we give the companies their final score we overweigh for this opportunity factor, which actually accounts for 50 percent of the score.

What are the most difficult things to measure?

Emissions data remains inconsistent and incomparable as recording varies across companies. Therefore, we see gaps in emissions reporting, which makes it difficult to accurately assess emissions performance within companies as well as how they measure up to their targets.

We have also been revising our methodology to tackle greenwashing concerns. One thing we are looking to do is to start penalizing companies when there is evidence that the company is associated with deforestation-related events.Deforestation is another difficult one. The issue here is that numerous companies are setting deforestation targets – which of course is a good thing – but it is difficult to trust these targets as many companies are unable to fully trace the soy source back to their plantation. Also, for cattle, no supplier can confirm traceability of both direct and indirect suppliers. If they cannot trace, then the target becomes meaningless.

What has been the impact of the index so far?

So far, 30 percent of the index companies have asked for one-to-one calls with us to find out more about their scores and use it to shape their sustainability strategies. We’ve also seen companies hiring sustainability directors for the first time, while investors have been telling us that they use the data on their individual engagements and that it is highly valuable.

There have been further situations where the index has raised awareness and contributed to screening – over 44 investors have told us they use the index and other FAIRR data to inform negative screening and over 85 to identify best in class companies.

Thalia Vounaki is senior manager of research and engagements at FAIRR