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Sustainable & Impact Investing

May 11, 2022

Animal Welfare Investing

Animal welfare is an important public issue that elicits emotional responses from many people. We live in a society where we are faced not only with alarming data about the effects of climate change but also startling statistics about animal welfare worldwide, including:

  • An estimated 5.5 trillion pieces of plastic waste in the oceans, leading to more than 1 million deaths per year of marine animals, with virtually all of this plastic debris originating on land through overuse of plastics and improper waste disposal[1]
  • 110 million animal deaths in the U.S. annually due to chemical, drug, food and cosmetic testing[2]
  • 37% of annual methane emissions in the U.S. are accounted for by the 10 billion U.S. land animals per year raised for dairy, meat and eggs[3]

Animal welfare is also an emerging investor issue. Individuals, families, nonprofits and foundations are increasingly seeking to design portfolios targeting investment in companies that promote animal rights and protection while seeking competitive risk-adjusted returns. Many investors want to invest in companies that share their personal or organization’s values. Animal welfare investing is an emerging and new way to promote animal welfare.

What is animal welfare investing?

Animal welfare investing can employ investing strategies which: 1) avoid (or divest from) companies engaging in activities detrimental to animals, 2) engage with companies to encourage better behavior and 3) invest in companies that promote animal welfare.

Divest

If you believe certain assets no longer meet your social impact criteria, reducing exposure to a company’s stock through selling the asset entirely or partly closing the position is one way to “exclude the worst offenders” of animal rights from your portfolio. Several animal rights organizations provide information to help identify companies that do and do not test cosmetics, toiletries and other household products on animals:

Examples of companies to divest from:

  • Animal testing-nonpharmaceutical: Company involved with animal testing for cosmetics, personal care and housecleaning
  • Animal testing-pharmaceutical: Company involved with animal testing for drugs or medical devices for human use
  • Factory farming: Company involved in animal breeding purely for the purpose of food production
  • Fur procurement or sales: Company involved in raising, trapping, slaughtering or selling products for their fur

Engage

Engagement is one of the most powerful ways to use capital to affect change. Investment managers can use an engagement strategy to pool the capital they own in a strategy and pressure individual companies, via the introduction of a shareholder resolution, to change their ways. Often, investment managers will form coalitions with others in the space to increase their power. These engagements are often originated and then coalesced by shareholder engagement coalition groups, providing engagement opportunities for investment managers to consider.

Example: Successful engagement with the top five largest plastics manufacturer globally to report and change business practices related to pollution of plastics in the oceans.

Invest

This strategy draws the focus away from “bad actors” and prioritizes “good actors,” specifically those companies developing business models that seek to promote animal rights. There are an increasing number of companies that are using innovation to address animal welfare — companies like Impossible™ Foods, a plant-based meat company whose products are offered in more than 2,000 restaurants nationwide, including Burger King, and has a private market valuation of more than $7 billion.

Example: Patagonia, a publicly traded global clothing brand, recently debuted a line of jackets and hats utilizing plastic fishing nets  a high-growth line for the company in 2021.

Conclusion

At Glenmede, we can design diversified sustainable and impact investing portfolios around a theme — whether it is climate change, diversity, equity and inclusion or, in this case, animal welfare.  We use three pillars to do so: 1) strive for competitive risk-adjusted returns, 2) utilize ESG & impact measurement reporting and 3) seek shareholder engagement opportunities.

Research shows that to produce impact in these spaces one does not necessarily have to sacrifice returns. We can design diversified portfolios intended to meet your financial and impact goals and believe measuring those impact goals is important. Last year, Glenmede introduced portfolio-wide ESG and impact measurement that enable the monitoring of a portfolio along key environmental metrics like carbon emissions offset, social metrics around diversity, equity & inclusion and quantitative figures around the percentage of the portfolio directly aligned or misaligned with animal rights. Lastly, we can serve as a coalition-builder to take the power of your investment capital, combine it with others, and facilitate your participation in shareholder engagements in line with your goals.

Please email sustainableandimpactinvesting@glenmede.com to learn more about how we can customize a portfolio that considers animal welfare.

 

[1] https://www.oceanresearchproject.org/programs/science/marine-debris/

[2] https://www.peta.org

[3] https://www.dosomething.org/us/facts/11-facts-about-factory-farms-and-environment.

This article is intended to be an unconstrained review of matters of possible interest to Glenmede clients and friends and is not intended as personalized investment advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation.  Any opinions, expectations or projections expressed herein are based on information available at the time of publication and may change thereafter, and actual future developments or outcomes (including performance) may differ materially from any opinions, expectations or projections expressed herein due to various risks and uncertainties. Information obtained from third parties, including any source identified herein, is assumed to be reliable, but accuracy cannot be assured. In particular, information obtained from third parties relating to “ESG” and other terms referenced in this article vary as each party may define these terms, and what types of companies or strategies are included within them, differently. Glenmede attempts to normalize these differences based on its own taxonomy, but those efforts are limited by the extent of information shared by each information provider. Definitional variation may therefore limit the applicability of the analysis herein. Any reference herein to any data provider or other third party should not be construed as a recommendation or endorsement of such third party or any products or services offered by such third party.  Any company identified herein is provided solely for illustrative purposes and should not be construed as a recommendation or solicitation for the investment in or divestment from such company.  Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Clients are encouraged to discuss the applicability of any matter discussed herein with their Glenmede representative.