Markets paying close attention to ESG in agricultural industry

Markets paying close attention to ESG in agricultural industry

With an increased emphasis on environmental, social, and governance (ESG) principles growing across all industries, driven by demands from internal and external stakeholders, as well as the desire to compete for top talent in a competitive market, companies are recognizing they must start making ESG initiatives a top priority.

In the agricultural industry, animal welfare is a central, developing ESG tenant to which investors are more closely paying attention – and, therefore, companies are starting to address. Recognizing animal welfare as a practical business matter and also an ethical focus for consumers, large food companies such as Tyson are highlighting animal welfare practices and its importance in the value supply chain.

Just last year, the Hapres Journal of Sustainability Research published an abstract on how new technology can be used to automatically monitor and improve animal welfare, which in turn can increase stakeholder confidence and the reputation of food companies. The article emphasizes how animal welfare is a commercial risk, strategic opportunity, and moral commitment, with implementing documentation of formal animal welfare policies and monitoring measurements providing a good place to start.  

Access to capital is critical for the agricultural industry, and that access could be enhanced with an animal welfare focus. A 2015 Farm Animal Investment Risk & Return report, Considering Farm Animal Welfare in Investment Decision-Making, showed how “responsible investors are beginning to take into account (farm animal welfare) as part of mainstream investment practices.” It provides nine case studies demonstrating “how different types of investors from all over the world – including asset owners, investment managers and investment service providers – are meeting the challenge of integrating farm animal welfare factors into the investment process.”

Recently I visited Cain Farms in Belmont County, Ohio.  The Farm is a multi-generational family dairy farm started in the early 1950's.  They started introducing robotics in January 2020 and are currently milking, feeding, and collecting the manure with robotic technology.  Not only is the farm more efficient, it has also become more productive as the cows are milked and fed on their natural schedules instead of the farm’s schedule.  I also learned that capital is readily available for this type of project that increases animal wellness along with farm productivity. 

McDonald Hopkins is tracking these developments and has established an ESG practice area and is undertaking the task of enhancing the ESG profile of our clients in the food processing space.

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