Animal Factory Farming

AnimalFactoryFarming:Killerstatsinvestorscan’tignore

JeremyCollerCIO,CollerCapital

III.AcceptanceII.ViolentOpposi1onI.Ridicule

1988–Swedenbansba=erycages2013–Gesta?oncratesbannedintheEU2015–CaliforniaEnactsStrictestAnimalAn?bio?cLawintheUS

Beginningofthejourneytoacceptance

Slavery

Women’sRights

GlobalWarming

186513thamendmentoftheUSCons?tu?on

Today–slaveryisillegalacrosstheglobe

1919USWomen’sSuffrageAmendmentToday–widespreadsupportforequality

AnimalFactoryFarming

2005KyotoProtocol

Today–globalwarmingisanissue

“Awomen’splaceisinherhome”

An?-Suffrage=epostcard,late19thcentury

“Globalwarmingisascam,perpetratedbyscien1sts”

Mar?nKeeley,Geologist,2004

“Idon’tknowwhoaskedthesowifshewantedtoturnaround”

Na?onalPorkProducersCouncilUSonuseofcruelgesta?oncrates,2012

“Ihaveenduredagreatdealofridicule”

AbrahamLincoln,1863

Source:FAIRRresearch

Animalfactoryfarmingisthreateningglobalsustainability...thisisnotaboutvegetarianism

Thethreestagesoftruth

2

Factoryfarmingisanewphenomenon

Factoryfarminghasexplodedontheworld…99%ofallmeatconsumedintheUSisfactoryfarmed;63%intherestoftheworld

Source:¹FoodandWaterWatch,2012;²UNFAO,2013;³UNFAO,2012

Factoryfarmedpigs(US,%)¹

GlobalanimalpopulaTon1993–13billion2013–23billion(+77%)²Onaverage,thereare3chickensperperson²1980–9%of consumedcomesfromfishfarms

2013-50%³ofconsumedcomesfromfishfarmsThesenumbersareprojectedtoincrease….

30%

97%

1992

2013

3

Thefourinconvenienttruths

Factoryfarminghasexplodedontheworld…99%ofallmeatconsumedintheUSisfactoryfarmed;63%intherestoftheworld

1

Threatenshumanhealth

2

ContributestoglobalwarmingandpolluTon

3

Endangersfoodsecurity

4

Consumesourplanet’sscarce

resources

4

1

3

2

4

ThreatensHumanHealth

#1UseofAnTbioTcs-Worldwide

•  80%ofallan?bio?csintheUSareusedonfarmanimals;65%inEurope

•  LastResortAnTbioTcs:ColisTnResistanceFoundScien?stsdiscoveredbacteriaresistanttothedrugoflastresortinpa?entsandlivestockinChina,EuropeandUS

•  Increasedfrequencyofanimalepidemics

Sources:CDC,2012;TheGuardian,18June2015;CDC2013,FDA.gov;Na?onalResourcesDefenseCouncil(NRDC);TheAlliancetoSaveOurAn?bio?cs,2011;PNAS,2015 5

1InconvenienttruthHumanHealth

•  Thelivestocksectorproduces14.5%ofglobalgreenhousegasemissions,morethanthetransportsector(13%);thisincludes

•  39%ofmethaneemissions

•  65%ofnitrousoxideemissions

•  130xmoreanimalwastethanhumanwasteisproducedintheUS

ContributestoGlobalWarmingandPollu?on

TheirreversibleTppingpointofglobalwarmingisfastapproaching

Sources:ChathamHouse,2014;ChathamHouse,2014andFAO,2013;EnvironmentalIntegrityProject,2011;WorldWatch,2009;UnitedStatesEnvironmentalProtec?onAgency(EPA) 6

2InconvenienttruthClimate

EndangersFoodSecurity

ProteinconsumpToniscrowdingoutcaloriesforpeoplelivingatsubsistencelevel;diverTngsomeresourcesfromanimalstohumanswouldfeedtheworld

Sources:AmericanJournalofClinicalNutri?on;UNEP,2009;www.fishcount.org.uk;PNAS,2013;FAO,IFADandWFP,2014;UniversityofMinnesota,2013

Thenewphenomenoncan’tfeedtheworld…

•  Atleastonethirdoftheworld’sgrainharvestisfedtofarmedanimals

•  Onaverage,ittakesaround6kgofplantproteintoproduce1kgofanimalprotein

•  4kgofwildfishareusedasfeedtoproduce1kgoffarmedsalmon

7

3Inconvenienttruth

FoodSecurity

Source:FAOSTAT,2015;JCFanalysis

Percen

tchange(1961=100)

50

100

150

200

250

300

350

400

450

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

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1973

1974

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1977

1978

1979

1980

1981

1982

1983

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1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Cerealsforanimals

PopulaTon

Cerealsforhumans

Arableland

MeatProducTon

1960s 1970s 1980s 1990s 2000s 2010s

AnimalsnowoutcompeTnghumansforcerealsWithroughlythesameamountofarableland,cerealshavebeendivertedfromhumanstoanimals

320%

230%

130%

60%

8%

TheGreenRevolu?on

FactoryfarmingisafalsesoluTon…itcannotfeedtheworld

8

ConsumesOurPlantsScarceResources

#1useroffreshwater;#1causeofdeforestaTon

Sources:FAO,2003and2006;WWF,2014;CIWFandWSPA,2012;Ins?tuteofMechanicalEngineers,2013;Es?matedwithdatafromWHO/UNICEFJointMonitoringProgrammeforWaterSupplyandSanita?on,2012

•  Es?matedlitersofwaterrequiredtoproduce100caloriesof…

•  Animalagricultureisresponsibleforupto91%ofAmazondeforestaTon

Beef

Pasta

Potatoes

1,000+

56

38

9

4InconvenienttruthPlanet’sResources

Thefourinconvenienttruths…Thefourhorsemenoftheapocalypse

FOODSECURITYGLOBAL

WARMINGPLANETSRESOURCES

Animalfactoryfarmingisthreateningglobalsustainability...thisisaboutmateriality,notmorality

10

Asaninvestor

Asanindividual

Asauniversity/businessleader

• Makeimpactinvestments

•  ReviewandbecomeamemberoftheFAIRR(FarmAnimalInvestmentRisk&Returns)Ini1a1ve(www.fairr.org)

•  Influenceyourbusinessprac1ces–forexample,VirginAmericaonlyservescage-freeeggsaboardtheirflights

•  Improveyourcateringpolicy–ensurethatnofactoryfarmedfoodisservedforinternalcateringandevents;implementa‘MeatFreeMonday’policy

•  Refineyourdona1onsandspeakingengagementspolicy

•  Asaconsumer,makethechoicetobuyhigh-welfaremeat,eggsanddairyandreduceyourmeatconsump1on

•  SignuptotheFAIRRnewsleher

Ifuniversi?esandpowerfulinvestorsarenotonthecurngedge,whowillbe?

11

12

Whatdoesthismeanforinvestors?

For example, Hallmark/Westland, a California-based meat packing company.

In 2008, evidence of animal cruelty and health concerns forced the company into the biggest meat recall in US history: 65 million kilograms, equivalent to the weight of 195 jumbo jets. The recall cost $116 million. But the resulting health and safety class-action forced them into bankruptcy in 2012.

Andtherearelargepublicexampleshiddeninplainsight…

13

Investmentrisksinthefastfoodindustry

Risksforinvestors

UnderperformedtheMSCIIndexby97%

Casestudy

Sources:GoogleFinance,Chipotle.com

MSCIIndex

PricinginvestmentriskPricinginvestmentrisk

2016

MeatcompaniesgoanTbioTcs-freeasmoreconsumersdemandit

03.11.2014

AretheretoomanyanTbioTcsinyourfastfoodmeat?

22.09.2016

TysontoenduseofhumananTbioTcsonchickensby2017

28.04.2015

CaliforniaEnactsStrictestLawLimiTngAnTbioTcsinLivestock

12.10.2015

Consumers BusinessesPolicymakers Investors

?

Knowledgegap

28.04.2015

SalesofanTbioTc-free&organicchickenhaveincreased25%&33%y/y,respecTvely*

Investmentriskshiddeninplainsight

*Year-end2015asperIRI,Chicago-basedMarketResearchFirm

21.09.2016

U.N.PledgesToFightAnTbioTcResistanceInHistoricAgreement

Consumers,policymakersandbusinessesarestarTngtoact...Investorsshouldtoo

14

15

Investmentrisksandopportuni?esinthepoultryandeggindustry

$3.3bnoverthefirst6monthseconomiccostduetoUSavianfluoutbreak,

represen?ng6%ofthe$50bnUSpoultryindustry

Governmentbillincludingcleanup=

$700m

Risksforinvestors OpportuniTesforinvestors

ReplacingeggsinmayonnaisereducespricevolaTlityinkeyinputs

Risks&

Opp

ortuniTe

sforIn

vestors

Casestudies

Theworld’slargestfoodcateringcompany,serving8millionmealsadayintheUSalone,haswalkedawayfromthe

mostcommonlysoldmayonnaiseintheworld

Sources:GoogleFinance;Na?onalGeographic,15July2015;USDAAgricultureSecretaryTomVilsack,July2015;CompassUSApressrelease,February2015

ClaraFoods

Eggwhites

BeyondMeatBeefandchicken

PerfectDay

Milk

HamptonCreek

Mayonnaise,cookiesandeggs

ImpossibleFoods

Meat

ClearLabs

Foodanalysis

MemphisMeats

Beefandpork

Gelzen

GelaTne

BoltThreads

Silk

ModernMeadow

Leather

KiteHill

Cheese

Sunfed

Chicken

ImpactInves?nginfoodandmaterialstechnology

ImpactinvestmentswiththeobjecTveofreducingdependenceonanimals

16

FarmAnimalInvestmentRisk&ReturnIni?a?ve

Asinvestorswecareaboutthebohomline–havewepricedrisk?

1. Acollabora?venetworkbyinvestors,forinvestors.

2. Withanobjec?vetoclosetheknowledgegap.

3.  It’saboutmateriality,notmorality.

4.  SincelaunchinDecember,morethan$1.5trillionofAUMjoinedtheFAIRRnetwork.

Byjoining,youcanbeanearlyadoptertopricethisrisk

17

FAIRRisahubbyinvestorsforinvestors

CasestudiesInvestmentriskreport Benchmark

InvestorCollateral

v  AskyourESGresearchproviderstoiden?fymetricsandprovidedataonthisrisk

Internalriskmanagement

DirectEngagement

v  Directdialoguewithcompanymanagementontheseissues

v  Collabora?veengagementwithcompanies

Bridgingtheknowledgegapforinvestors

AcTveStewardship

18

28ESGrisks Transparencyonsupplychains

Prac>calhelpbyinvestors

forinvestors

FAIRREngagementwithInvesteeCompanies(April2016)

AnTbioTcsengagement–backedby$1.5trillionAUM

•  Targe?ng10ofthelargestglobalfastfoodcompanies

•  AddressingtheexcessiveuseofanTbioTcsinlivestockproduc?on

•  60investorsignatoriestodate,with$1.5trillionAUM

CurrentStatus

•  8ofthe10companieshaverespondedandareindirectdialoguewithourteam

•  Companieshavealreadygivenconcretepubliccommitments:60insTtuTonalinvestorswithover$1.5trillionAUM

19

An?bio?csengagementlaunch(April2016)–presscoverage

‘Systemic’an>bio>cscrisistroublesbig

investors’

‘Investorgrouplaunchescampaigntocurban>bio>cuse’

‘BiginvestorspushMcDonalds,Yum!andDomino’stodrop

an>bio>cs’

‘Foodcompanyinvestorsdemandan>bio>creduc>on,

now!’

‘Investorsurgefastfoodandpubchainstoacttoreducefarm

an>bio>cs’

‘Investorgrouplaunchescampaigntocurban>bio>cuse

infood’

52arTclesinmajorpublicaTonsacross15countries

20

InvestorEngagementonSustainableProtein(Sept2016)Companytargetsforsustainableproteinengagement:

SustainableProteinEngagementlaunched

•  40signatoriestodate,with$1.25trillionAUM

•  Targe?ng16internaTonalfoodcompanies

•  Addressingthematerialriskstothelivestockindustryposedbythefourinconvenienttruths

•  Highligh?ngtheopportuniTespresentedbythegrowingmarketforplant-basedproteins

MiTgaTngclimateriskandbuildingresilientsupplychains

21

InvestorEngagementonSustainableProteinlaunch(Sept2016)–presscoverage

‘InvestorsurgefoodcompaniestoshiKfrom

meattoplants’

‘APfunds,Nordea,Folksamtakeaimatfoodcompaniesonmeatrisk’

‘We’readdictedtomeat.Andit’sdestroyingthe

planet’

‘GlobalInvestorsPushForaProteinShake-up’

‘InvestorsurgefoodcompaniestoshiKfrom

meattoplants’

‘Walmartandothersarebeingaskedtostopsellingasmuchmeat’

SustainableProteinengagement-backedby40investorswith$1.25trillionAUM

22

FAIRRIniTaT

ve–Geq

ngIn

volved

BridgetheknowledgegapReducerisk

[email protected]

JointheFAIRRIniTaTve

www.fairr.org

23

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