The Economist dubbed 2019 “The Year of the Vegan” in its edition detailing world trends for this year. “Where millennials lead, business and governments will follow,” the magazine said. And just as the youth-driven movement to save the planet has pushed environmental, social and governance concerns to the top of the finance industry’s agenda, asset managers are about to start feeling the heat about the food industry’s contribution to climate change.
Veganism is an idea whose time has come, partly due to individual lifestyle and health concerns but mostly because of the environmental damage caused by animal agriculture. Ruminant animals including cattle produce methane which contributes to global warming, while growing feedcrops for livestock leads to deforestation.
The number of Americans identifying as vegan climbed sixfold in the three years to 2017, with 6% saying they shun animal-derived foodstuffs, according to research firm GlobalData. In January, Caroline Lucas, the UK Green Party’s only Member of Parliament, called for a tax on meat to help the farming industry reduce its carbon emissions.
Meatfree food is all the rage. Restaurant Brands International Inc.’s Burger King said recently that it plans to start selling Impossible Whopper burgers in all of its 7,200 US restaurants after a successful trial run in St. Louis using veggie patties made by Impossible Foods Inc. Nestle SA, the world’s biggest food company, will start selling its Incredible Burger in European supermarkets in the coming weeks and has predicted that its sales of plant-based edibles may reach $1 billion within a decade. And California’s Beyond Meat Inc. saw its shares triple after its IPO at the start of the month, giving it a market cap of more than $4 billion.
Beyond Advisors, which is based in Jersey, has registered with the US Securities and Exchange Commission to launch a Vegan Climate exchange-traded fund. The ETF will be tied to a proprietary index which is based on the Solactive US Large Cap Index, but excludes “any stocks whose activities are incompatible with a vegan and climate-conscious approach to investing.” So Tyson Foods Inc, the top US meat processor, features in the benchmark index but is barred from the derivative.
So far this year, the Vegan index has delivered a total return of about 18%, which is three percentage points better than either the Solactive index or the S&P 500 index. Over a longer time horizon, its outperformance is even more marked.
Brad Pappas started Rocky Mountain Humane Investing in 1995 in Boulder, Colorado. His Vegan Growth Portfolio excludes any company involved in animal testing, factory farming or using animals as entertainment, as well as those involved in extractive industries such as oil and gas. That strategy has worked pretty well in the past five years.
My Bloomberg Opinion colleague Conor Sen warned a few weeks ago that regulators need to keep a careful eye on the purveyors of ethical protein given the venture capitalism industry’s predilection for playing fast and loose with the rules wherever and whenever there’s a quick buck to be made.
But the prospect of index-beating returns, combined with pressure from environmentally-conscious investors, look set to add veganism to the list of topics fund managers are already discussing when it comes to fulfilling their ESG responsibilities. Capitalism, red in tooth and claw, may be about to go vegan.