Global Investors Challenge Fast Food Companies on Climate, Water Risks

Over 80 investors warn that “animal agriculture is the world’s highest-emitting sector without a low-carbon plan.”

Published 5 years ago | About a 4 minute read

Image: Wendy's

Global investors representing more than** US$6.5 trillion** today called on six of the largest companies in the US$570 billion global fast-food sector to act urgently on the climate and water risks in their supply chains.

The investors have sent letters — facilitated by Ceres and the FAIRR Initiative — asking Domino’s Pizza, McDonald’s, Restaurant Brands International (owners of Burger King), Chipotle Mexican Grill, Wendy’s Co. and Yum! Brands (owners of KFC and Pizza Hut) to explain by March how they plan to enact meaningful policies and targets to de-risk their meat and dairy supply chains.

More than 80 investors have joined the letter, including BMO Global Asset Management (Canada), Aviva Investors (UK) and Aegon Asset Management (Netherlands). The engagements are supported by several investors that are also members of the Interfaith Center on Corporate Responsibility (ICCR).

“Every day around 84 million adults consume fast food in the US alone, but the inconvenient truth of convenience food is that the environmental impacts of the sector’s meat and dairy products have hit unsustainable levels. To put this in perspective, if cows were a country, it would be the world’s third largest emitter of greenhouse gases,” said Jeremy Coller, founder of FAIRR and Chief Investment Officer at Coller Capital. “Other high-emitting industries, such as cars or oil and gas, are beginning to set clear yet ambitious climate targets, making animal agriculture one of the world’s highest-emitting sectors without a low-carbon plan. A failure to tackle these major environmental problems in corporate supply chains puts the long-term financial sustainability of these household names under threat. Investors are calling for more strategic and innovative thinking to manage these risks.”

Mindy Lubber, president and CEO of Ceres, added: “Fast-food giants deliver speedy meals, but they have been super slow in responding to their out-sized environmental footprints. Investors are eager to see more leadership from these companies to reduce the mounting climate and water risks linked to their meat and dairy suppliers. From eliminating deforestation to reducing water waste, cleaning up their supply chains will have enormous impacts on the animal agriculture sector as a whole, and dramatically increase our ability to meet the goals of the Paris Agreement to limit global warming.”

The letters call on the fast food companies to:

● Adopt a supplier policy with clear requirements for suppliers of animal protein products to report and reduce greenhouse gas (GHG) emissions and freshwater impacts.

● Publish quantitative, time-bound targets to reduce the GHG emissions and freshwater impacts of their own meat and dairy supply chains.

● Commit to publicly disclose progress on these targets annually.

● Undertake a climate scenario analysis in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

A new investor briefing from FAIRR, also released today, highlights the environmental impact of the meat and dairy producers that supply the fast food sector. Agricultural emissions, including those from meat and dairy, are on track to contribute around 70 percent of total allowable GHG emissions by 2050. This will create an 11-gigaton GHG mitigation gap between projected emissions and the target level required to keep global warming under a 2°C threshold. The livestock sector is also estimated to use approximately 10 percent of annual global water flows.

The investor letter highlights that the meat and dairy industry currently has limited water and climate policies and goals in place. Analysis by the Coller FAIRR Index found that more than 70 percent of meat and livestock index companies do not have targets for reducing GHG emissions. The meat sector was also shown to be the lowest-performing industry in Feeding Ourselves Thirsty, a 2017 analysis of water management practices by Ceres, and is a major source of nitrogen and phosphorus pollution globally.

Alice Evans, Co-Head of Responsible Investment at BMO Global Asset Management said: “Far-sighted investors cannot ignore the headwinds facing the meat and dairy sector. Increased environmental regulation, rising consumer demand for plant-based food, and fears over water pollution from intensive farms are all ingredients in the rising threat to the long-term value of the fast food multinationals. This investor engagement is further evidence that capital markets are putting sustainable environmental management on the menu for the fast food sector.”

The global beef industry has made slow strides in improving its sustainability, with collaborative efforts to reduce deforestation and methane emissions from cattle, but it remains a long way away from being climate-friendly. Regardless of the mobilization that may arise from today’s investor challenge, the good news is, with the emergence of more and more plant-based burger options — including White Castle’s Impossible Sliders and Carl’s Jr.’s Beyond Famous Star here in the US; and Sweden’s Max Burgers, which offer a range of burgers that go so far as to be climate-positive — more chains are already illustrating that fast food doesn’t have to be climate-intensive.