16 September 2021 - It’s no secret that the financial sector and other types of investors are increasingly reluctant to fund the expansion of fossil fuels, and in some cases are reversing their stances and decreasing investment in ‘Big Oil’. This is due in part to the pressure institutions are getting from climate change activists.
SIGWATCH, a London-based for-profit company that monitors NGO activity, tracks and analyses activist campaigns to help organisations manage global issues and activist risk, is following this trend. The company recently argued that after Big Oil, ‘Big Ag’ could be next in line of the financial sector’s divestment campaigns.
Charlotte Moore, Head of Research at SIGWATCH, provided some details and discussed the risk that activist power can have on the animal agriculture sector with Feedinfo editor in chief, Simon Duke. Their discussion below has been edited and condensed.
[Simon] Charlotte, financial institutions are increasingly seeking to reduce their fossil fuel portfolio due to climate change activist pressure. Can you provide a brief overview of what’s going on?
[Charlotte] SIGWATCH data shows that NGO campaigning calling for financial institutions to divest from the fossil fuel industry has quadrupled over the past decade, with a current average of around 30 NGO actions per month globally driving this issue.
To put this into context, campaigning on the major issue of plastic pollution sees around 10 actions per month. Campaigns calling for divestment from fossil fuels started on university campuses in the US around 2011, and swiftly gained traction as the major US environmental organisation 350.org launched its own divestment campaign in 2012. These campaigns then spread to the UK, with the launch of Fossil Free UK in 2013. Subsequently, most major environmental activist groups have included calls for divestment from the fossil fuel industry in some form. At the time, 350.org’s founder Bill McKibben was quoted as saying the goal of the campaign was to “revoke the social license of the fossil fuel industry,” and many would agree that they are close to succeeding in that goal.
[Simon] How effective are these activist campaign actions?
[Charlotte] As activists have relied more and more upon fossil fuel divestment campaigning as a key tool in their fight against climate change, major institutions such as BlackRock, Deutsche Bank, JP Morgan Chase, and Morgan Stanley have all taken action to reduce their fossil fuel portfolios. It has become clear, however, that while the actual financial impacts of divestment so far have not been huge, the reputational damage caused to energy majors and the fossil fuel industry is much more serious. Discourse around stranded assets and the serious financial risks of investing, or maintaining investments, in fossil fuels has led to a shift in the way people and governments talk about the sector. As a result, actions that once would have seemed extreme, such as the imposition of carbon taxes or stricter industry regulations, become more reasonable in comparison to divestment calls, and therefore more likely to be achieved.
[Simon] In your view, anti-meat activists are adopting the same strategy to target animal agriculture. Do you foresee financial institutions pulling out of this sector and divesting assets? Is this trend already underway?
[Charlotte] The most prominent example of divestment from industrial agriculture, and meat in particular, was the decision in 2020 by Scandinavian financial group Nordea to divest $45 million from Brazilian meat producer JBS. This was largely attributed to a Fair Finance Guide report criticising the bank’s links to Amazon deforestation through investments in Brazilian meat producers.
It is not out of the question that investors will start to pull funding from agriculture ‘climate criminals’, but initially these actions will probably be focused on big-name agribusinesses that NGOs are already citing in reports and campaigns, such as JBS and Minerva. But, as with the fossil fuel sector, the biggest concern for the meat industry has to be the reputational damage of serious divestment campaigning. These campaigns could threaten not just the most egregious examples such as Brazilian cattle ranchers, but also their major customers such as global food brands, agribusiness producing feed grains such as soy, and leading retailers.
[Simon] The animal production and animal nutrition sectors have been making huge progress in offsetting carbon emissions, ensuring animal welfare, and producing in a more sustainable manner. Meat companies like JBS or Tyson Foods have announced net zero plans. There is a lot of innovation going on, including at the nutritional level. New technologies are being used (e.g. methane-reducing feed additives) and more sustainable ingredients are being sourced. The animal protein industry, via more dietary changes and husbandry changes is becoming more sustainable. All this is leading to new investment opportunities in new technologies and in growth industries. Investors are seeing all this and making investments in the sector.
With that in mind, why should financial institutions/pension funds behave differently?
[Charlotte] It’s clear that as campaigning on agriculture’s climate impact rises, financial institutions looking to stay abreast of the Environmental, Social, and Corporate Governance (ESG) wave will have to address the issue in some form. What’s not clear is whether this will be via divestment or via engagement with companies in their portfolios to ensure that change is made quickly enough, and with sufficient ambition. While many activists do campaign for outright divestment, there are others that favour the engagement approach as a more effective way to promote meaningful action.
The path that financial institutions will choose depends on whether divestment campaigns can inflict enough reputational damage on the sector that it becomes virtually untouchable, as with the oil and gas industry. It also depends on the willingness of agribusiness itself to make sufficient changes - only recently, Legal & General Investment Management, one of Europe’s largest asset managers, divested from China Mengniu Dairy due to the company’s “insufficient action” on climate risks. Activists brand agribusiness’s current initiatives on climate as such, claiming that they fail to address total supply chain emissions, particularly from deforestation. They make similar complaints about oil companies’ net zero commitments because of a reliance on offsetting rather than “real” emissions cuts.
[Simon] A common recurring refrain from NGOs is that the agricultural sector emits more greenhouse gases than ExxonMobil. It is somewhat untrue to say that agriculture emits more GHGs than the transport and energy sectors and there are a lot of misleading figures out there which don’t provide proper comparisons, nor do they reflect the reduced GHGs of the animal agriculture sector over the years.
Agriculture has a tremendous opportunity to have a positive impact on the planet, yet some are vilifying what could be a science-based solution. Surely, the financial sector is seeing this too and not solely listening to activists?
[Charlotte] Activist campaigning rhetoric is influential, and the unfavourable comparison with ExxonMobil is a very powerful statement to make when oil and gas majors are considered the major climate criminals of the current age. Financial institutions will, of course, take into account a wide range of data when making investment or divestment decisions. Certainly, no one is assuming that activist campaigning is so persuasive that it could be the only factor in a divestment decision. However, increased attention from activists will doubtless provoke greater caution from banks, pension funds, and insurers in their dealings with agribusiness. It is, then, up to the financial institutions and the agricultural sector to determine how to engage with this scrutiny in the most effective and constructive manner.
[Simon] As animal rights activists are creating a common cause with environmentalists, does that make them even more powerful and their voices louder? What’s your advice to animal nutrition companies for dealing with this growing challenge?
[Charlotte] Environmentalists have long had the loudest voices of almost all mainstream activists, so the overlap with animal rights activists on meat divestment campaigns brings yet more outlets for their demands, as well as more varied audiences. The same goes for indigenous rights activists, whose opposition to large-scale agriculture on the basis of human rights brings yet another dimension to agricultural divestment campaigning.
I would urge the animal nutrition industry to pay close attention to activist NGO campaigning. At SIGWATCH, we often say that NGOs don’t just make the weather, they are the weather. To be unaware of their campaigns or demands does not mean they won’t affect your business, rather that you won’t know you’re affected until it’s too late. There are plenty of opportunities to predict and mitigate risks by engaging with activists and activism if you are savvy enough to seek them out.