New Animal Welfare Cause: How to Avoid Future Risk and Hold Businesses Accountable
Learn more about OpenInvest’s new Support Animal Welfare Cause and how investors can manage risk while advocating for animals, the environment, and disease prevention.
The business of animal production prioritizes profits through increased efficiency. In the process, it’s more than just the animals that suffer. From environmental concerns to worker rights to food safety, animal welfare is a cause that can affect everyone.
The impact is especially evident with COVID-19, a virus, like the swine and avian flu, which highlights the disease risks from both wild and domestic animals. As consumer awareness of the link between the health of animals and humans continues to grow, so does the pressure for businesses to take action on animal welfare.
To support rising demand in the industry, OpenInvest launched a new Support Animal Welfare Cause. This Cause is our first investment vehicle that addresses the welfare of domesticated and captive animals.
As we launch this new Cause, we reflect on the state of animal welfare today, provide context for its importance, and share how investors can play a role in holding businesses accountable.
What is animal welfare?
Animal welfare is the care and wellbeing of animals. It focuses on all forms of animal engagement including the care and treatment of domesticated or captive animals within factory farming, animal testing, and animal-related tourism. Our Support Animal Welfare Cause has identified factory farming and animal testing as the most significant focus areas for impact investors.
Factory farming describes an industrial facility that “raises large numbers of farm animals such as pigs, chickens, or cows in intensive confinement where their movements are extremely inhibited.” These farms produce meat, eggs, and dairy products distributed for food consumption.
According to the Food and Agriculture Organization of the United Nations (FAO), nearly 9.5 billion animals were slaughtered in the United States in 2018. That’s approximately 25 million farm animals slaughtered every day.
Animals in factory farming experience an incredible amount of suffering from cages, overcrowding, teeth-clipping, tail-docking, overbreeding, and rough or abusive handling, among many other things. Animals are also subjected to unnatural confinement, impacting their natural animal behaviors and often leading to illness or injury.
To better understand the conditions of factory farm animals, let’s look at the largest group of animals represented in factory farming: birds. In the United States, we raise and slaughter ten times more birds than any other type of animal.
Most of these chickens, turkeys, and other birds will spend their entire lives before slaughter in a space smaller than a piece of paper surrounded by up to 10,000 other birds living in their own waste. Due to their conditions, most birds will suffer painful lameness, overworked hearts and lungs, and wounds such as skin sores or burns.
Factory farming can actively benefit from people looking the other way or marketing that gives the impression that conditions aren’t as bad as they are. For example, meat, egg, and dairy packages often include terms such as “organic” or “cage-free,” giving the appearance of animal welfare. Yet, only a fraction of those labels maintain any kind of actual animal welfare practices.
The reality is that animals in factory farms are the least protected animals in the nation, with no federal laws to protect them. The only federal laws in existence apply to animal transport and slaughter standards. However, these laws do not include poultry or aquatic species, which make up 95% of animals killed for food. While there are some state laws in place, the majority of U.S. states exempt farm animals from any animal welfare laws or rules.
The danger of this kind of animal treatment is about more than just the fair treatment of animals. Animal welfare impacts our health and the health of our planet.
Many animals are subject to consumer and medical product testing. In some countries, the law requires animal testing for the sale of certain products. However, animal testing is not always legally required. 96% of drugs that pass preclinical tests, including “pivotal” animal tests, never even make it to market. These tests, usually done on animals such as mice, rats, frogs, dogs, cats, monkeys, rabbits, guinea pigs, or hamsters, often result in the animal’s death.
Animal testing impacts more than 100 million animals each year. Many animals are forced to inhale toxic chemicals, have chemicals rubbed into their body or dripped into their eyes, or swallow large amounts of chemicals to determine the dose that causes death. These animals are not guaranteed any kind of pain relief during these tests. And most of these animals receive no protection under the Animal Welfare Act.
Cruelty-free brands commit to making products with no animal testing at any point throughout the process. However, the term “cruelty-free” is unregulated, meaning any product can use this label without repercussion, whether they are cruelty-free or not. Organizations like Cruelty-Free Kitty help identify which brands are truly cruelty-free.
The state of animal welfare today
As a result of increasing consumer awareness, labeling requirements, and regulation, some companies have started to make animal welfare more of a priority. Yet, we still have a long way to go.
According to the 2020 Business Benchmark on Farm Animal Welfare (BBFAW) report, one in five major food companies does not have any farm animal welfare policy. Of the ones that do, two-thirds lack universal coverage, or their scope of coverage is poorly defined and limited to specific locations or species.
Image source: BBFAW
The impact of animal welfare
Animal welfare is not just about the fair treatment of animals. It is about advocating for the laborers in this industry, reducing the environmental impact of factory farming, limiting our risk to potential diseases, and improving our health.
Food safety and disease impact
A 2020 UN report found that intensive farming was responsible for more than half of all infectious diseases passing between animals and people since 1940. The passing of disease from animal to human often occurs through direct contact or consumption of the animal or exposure to animal waste. The poor living conditions of these animals are incredible breeding grounds for diseases.
Although the COVID-19 pandemic did not come from factory farming, many infectious diseases have come from livestock. These diseases include swine flu, avian flu, and the Nipah virus — this exposes a significant risk in the industry for future disease and pandemic control. COVID-19 has demonstrated that we are incredibly vulnerable to these types of risks.
“Not only do the cruel practices of intensive farming subject animals to misery, but they expose us to potential diseases and risks too...Animal cruelty is becoming more and more important for consumers – producers, supermarkets, and restaurants would be foolish to ignore it.”
- Steve McIvor, World Animal Protection CEO
We trust that the food we consume is safe for consumption. Yet, companies design factory farms to make a profit, not to prioritize safety. Due to the stressful and unsanitary locations that factory farms keep animals in, most companies heavily rely on antibiotics as an attempt to eliminate Salmonella, E. coli, or other pathogens or diseases. The overuse of antibiotics in animals puts us at risk for treating potential diseases in humans.
The increasing use of antibiotics in our food system creates antimicrobial resistance, drug-resistant strains of bacteria that can then develop and spread among people. It has the potential to kill 10 million people annually by 2050 if we don’t take action to respond to this threat. Currently, 65% of Index companies provide no disclosure of their antibiotic usage.
Factory farming produces more greenhouse gases than all the world’s transportation combined, accounting for 14.5% of all greenhouse gas emissions. According to the Farm Animal Investment Risk & Return Initiative (FAIRR), this is a result of “enteric fermentation, manure management, feed production, land use, packaging and transport,” among other factory farming activities.
These facilities emit more than 400 types of toxic gas and contribute to increasing climate change. They also drive deforestation, use up precious water resources, and contribute to waste and pollution.
Livestock farming is one of the biggest drivers of deforestation. It’s not just land needed for cattle ranches or other factory farms, but it’s also the production of food to feed all these animals. Factory farming also requires an incredible amount of water use. The improper handling of manure and waste contributes to wastewater discharge that heavily impacts surrounding communities through poor air and water quality.
Climate change is one of the most significant ESG risks. Yet, many companies are not holding themselves accountable for their impact on the environment when it comes to animal welfare.
Factory farming has substantial health impacts on people, and especially the rural communities, farmers, and workers, who work or live near factory farms. Nearby residents experience dangerous drinking water conditions, air pollution, and other health and environmental impacts. These health impacts disproportionately affect poorer communities and people of color who live in these rural areas.
Workers employed by factory farms are some of the lowest-paid workers in the United States. They also face high risks of injury, illness, and exploitation due to the nature of their jobs. Even after the outbreak of COVID-19, many factory workers were forced to continue working despite health concerns.
The lack of human rights in factory farming severely impacted the supply chain during COVID-19 when factories had to shut down due to poor working conditions and treatment. Investors have a right to know which companies lack human health and safety and animal welfare regulations. Not only for moral consideration but financially to avoid operational and reputational financial risks down the line.
The role of investors in advocating for animal welfare
One of the biggest challenges for animal welfare is incentivizing companies to disclose their impact and make changes that improve the well-being of animals. Investors and our Support Animal Welfare Cause can encourage companies to engage more closely and remain accountable to their animal welfare actions and policies.
Consumer interest and demand for action have already started to impact this space. In 2012, only 22% of companies in the first BBFAW Benchmark reported on senior management oversight of farm animal welfare, and only 26% had published formal improvement objectives for farm animal welfare. In 2020, those numbers rose to 51% and 79%, respectively.
While there is still work to be done to get companies to actively report on their progress toward these objectives, this still demonstrates the power that consumer interest and demand can have on animal welfare. Your investments, along with increased regulation, can help shift promises for animal welfare into action.
OpenInvest’s Support Animal Welfare Cause
Our Support Animal Welfare Cause gives investors insight into the top companies who focus on the humane treatment of animals and those who do not make animal welfare a priority in their operations.
OpenInvest invests in companies that:
- BBFAW and the FAIRR identify as leaders in farm animal welfare
- Develop plant-based protein alternatives
- Offer humane and animal welfare-certified products, as identified by the ASPCA Shop With Your Heart Brand List
- Have leading animal-related tourism policies, as identified by World Animal Protection’s Tracking the Travel Industry Report
- Partner with animal welfare organizations such as World Animal Protection (WAP), the American Society for the Prevention of Cruelty to Animals (ASPCA), and the Humane Society
OpenInvest divests from most companies that:
- Are involved in meat, fish, poultry, leather, and fur production and retail, as identified by the BBFAW, FAIRR, and Refinitiv Eikon
- Use animal testing, as identified by Refinitiv Eikon and Cruelty-Free Kitty
- Have poor animal-related tourism policies, as identified by World Animal Protection’s Tracking the Travel Industry Report
Here are some notable companies that “fail” or “pass” the ESG considerations for animal welfare as part of our Support Animal Welfare Cause:
- Beyond Meat
- Kellogg Company
- Lemonade Inc.
- Marks & Spencer
- Tattooed Chef
- Tripadvisor, Inc.
- The Walt Disney Company
- Amazon and Whole Foods Market
- Costco Wholesale Corporation
- Dunkin' Brands Group, Inc.
- The Estée Lauder Companies Inc.
- Expedia Group, Inc.
- The Hershey Company
- Johnson & Johnson
- The Kraft Heinz Company
- Papa John’s Pizza
- The Procter & Gamble Company
- Starbucks Corporation
- Walmart Inc.
Investment risks and opportunities
Animal welfare is a key source of business risk and opportunity. Understanding a company’s approach to animal welfare is important for assessing its management systems and supply chain effectiveness.
A company that doesn’t disclose or prioritize its processes or impact on animal welfare raises questions for investors on how effective that company can be in managing potential risks or opportunities down the road. It’s also impossible to assess future risk without the disclosure of the right information.
Businesses and factories forced to shut down during COVID-19 were not prepared for market volatility, new regulations, and changing standards. To ensure continued growth, businesses should address supply chain risks proactively before a factory shut down.
The big takeaway
Investors have, and can, continue to play a major role in pressuring companies to keep animal welfare on the agenda. By investing and divesting from companies through our Support Animal Welfare Cause, investors can provide further incentives for the support of animal welfare across their portfolios. Animal welfare doesn’t just affect your risk management strategy, it also impacts the health of our animals, environment, food, and communities.