Pension funds have been warned of the risks of poor standards of food safety, antibiotic use and environmental management in the Asian meat, dairy and seafood sector, which threatens investments.

A new report by Farm Animal Investment Risk and Return (FAIRR) and Asia Research and Engagement (ARE) has urged investors to treat the rise of intensive farming across Asia with extreme caution. It comes as the supply of Asian meat is on the increase, with the OECD predicting that supply will grow 19 per cent by 2025.

For example, China’s New Hope Group and Wen’s Group are now among the 10 largest animal feed manufacturers globally. In addition, half of seafood in Asia is now produced in intensive factory farms. However, the report found that Asia’s meat, seafood and dairy industries face a range of badly managed sustainability risks including food safety, antibiotic overuse and environmental risk.

The report highlighted that three years ago McDonalds and Yum! Brands lost US$10.8bn of market cap due to the supply of expired meat from Shanghai. However, the report noted that the region is still suffering from food safety scandals such as the dioxin-tainted eggs in Taiwan.

As a result, the report has identified investment opportunities in innovative Asian companies that create sustainable food products. Leading meat substitute producer Quorn, owned by Asian food giant Monde Nissin, reported unprecedented global growth in the first half of 2017 with sales up 19 per cent worldwide. The FAIRR report also cites innovations such as a Taiwanese biotech company using QR codes to help consumers check the quality of eggs.

Commenting on the research, Dutch pension provider APG manager of sustainability and governance Jaideep Panwar said the research reminds investors to keep a close eye on the long-term risks of food assets in Asia.

“Antibiotic resistance is a serious global health risk with long-term potential economic consequences. The evolution of what are now early-stage domestic regulatory moves in Asia, supplier conditions introduced by international brands and import restrictions in response to the misuse of antibiotics in animal production can impact the productivity of Asian producers and their access to markets. Investors will assess the ability of companies in the meat supply chain to position themselves ahead of these risks.”

Earlier this year, Strathclyde Pension Fund signed a letter to food giants such as McDonalds, J.D. Wetherspoon and Domino’s Pizza Group urging them to reduce their use of preventative antibiotics on farm animals. The use of preventative antibiotics in farm animals is seen as risk to the rising threat of antibiotic resistance in humans, in which the World Health Organisation has described as “one of the biggest threats to global health today”. FAIRR has argued that this exposes institutional investors to significant material risks.

Furthermore, FAIRR founder Jeremy Coller said: "Simply put, a failure to reform the Asian meat and dairy industries in areas like food safety, could spell a nasty bout of financial food poisoning for global investors. Investors must step up to the plate.

“Investors have a big appetite for Asia’s animal protein sector. But growth is driven by a boom in factory farming which tends to mean more emissions and more epidemics, abuse of antibiotics and abuse of labour. All risks to returns.”

Share Story: