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Financial Future for Factory Farms Looks Grim, Post-COVID

New ‘Pandemic Ranking’ from $20T investor network warns that, with over 70% of animal agriculture firms at ‘high risk’ of creating future pandemics, COVID-19 could be the “straw that breaks the meat industry’s back.”

Global meat giants such as Brazil’s JBS and India’s Venky’s, both suppliers to household names such as McDonald’s, are among 44 firms highlighted by investors for their inability to prevent the emergence of new zoonotic diseases. The report highlights seafood as a lower-risk alternative; and points to a boom in sales that sees plant-based meat alternatives well positioned to win market share, as animal agriculture struggles to implement costly biosecurity and other pandemic-prevention measures going forward.

The findings are from new research produced by FAIRR — a global investor network supported by institutional investors managing assets of over $20 trillion, working to address ESG issues in protein supply chains.

In March, just as the WHO declared the coronavirus a pandemic, FAIRR released the FAIRR Climate Risk Tool™ — a first-of-its-kind tool to model the financial impacts of climate change on five leading meat firms and the animal protein sector at large. The tool forecast that the imminent physical impacts of climate change and the rapid and continuing growth of alternative proteins will put billions of dollars at risk for the sector.

Since then, we have been weathering the enormous economic and human health shocks caused by COVID-19 — which, along with the travel industry and the sharing economy, have hit the meat industry particularly hard: Share prices of four of the US’ largest meat processors (JBSSmithfield, Tyson and Sanderson Farms) have plummeted 25 percent (versus the market at 9 percent); and widespread meat plant closures led to Tyson Chairman John Tyson warning last month in a Washington Post ad that the “food chain is breaking.”

He’s not wrong: FAIRR’s An Industry Infected report finds that 73 percent of the world’s largest, listed animal protein producers (collectively worth over $220 billion) score as “high risk” in its Pandemic Ranking. Due to their very nature (squeezing as many animals into as little space as possible), CAFOs (concentrated animal feeding operations) or factory farms create optimal conditions for cross contamination among animals — and ultimately, for the workers who slaughter and process them. Combine that with the widespread routine antibiotic use in the industry, which accounts for over 70 percent of antibiotic use worldwide: Antibiotic resistance has already posed additional challenges in treating COVID-19 patients, and sector leadership is needed to prevent antibiotic-resistant superbugs causing the next pandemic.

These producers’ poor performance across a set of seven criteria that are vital to preventing future zoonotic pandemics — including worker safety, food safety, deforestation and biodiversity management, animal welfare and antibiotic stewardship — demonstrates that intensive animal production is at serious risk of creating and spreading a future pandemic.

While none of the companies ranked qualified as “best practice” or “low risk,” four of the five highest-ranked companies are from the aquaculture industry, due to their stronger performance across all risk factors considered — particularly, low risk in terms of antibiotic use, deforestation and biodiversity loss. Also, unsurprisingly, the research points out that sales of plant-based alternatives have continued to skyrocket across markets including the US and China during the pandemic; and some have been able to compete directly on price for the first time.

FAIRR says that the Pandemic Ranking can inform investor conversations with portfolio companies during and post COVID-19. The scores point to a clear lack of best practice across ESG risk factors, many of which will be critical to mitigating volatility and building resilience against possible future external shocks, such as the next pandemic. Financial losses to the US cattle industry have been predicted at more than $13 billion; and Jeff Currie, head of commodities at Goldman Sachs, has listed livestock alongside oil as one of the two most precarious commodities for investors next year.

Read more about FAIRR’s Pandemic Ranking here.