Market Update - Vegetarian and vegan investing
Vegetarian and vegan investing
Vegetarianism and veganism are gaining in popularity in the United Kingdom and elsewhere. Increasingly, people are giving up meat, dairy, and in some cases animal products of all kinds, for ethical reasons, concerns about the environmental effects of livestock farming, as a health or even a lifestyle choice. It is now estimated that over a fifth of the UK population follows a vegetarian or vegan diet. This is someway short of India where anywhere between 23 and 38% of the population shun the consumption of animals, either on cultural, religious, or cost grounds. But the UK easily outdoes near neighbours such as France (around 5%) and Spain (1.5%). For the US, it’s also estimated that around 5% of the population are vegetarian, roughly around the same percentage as China, where meat consumption grew rapidly from the mid-1990s as the country became richer.
Many people have taken their dietary preferences further and have started to look at the involvement of specific businesses in food production. Often, they will boycott companies that produce or use animal products, as well as those that don’t adhere to Environment, Society and Governance (ESG) rules which we covered in an earlier blog. This leads us to investing. After all, would you want to invest in companies linked to meat production if you were a determined vegetarian? Probably not. Yet that is likely to be the case if you pay into a pension. It’s quite likely that your pension fund will include a few companies linked to livestock and animal products in one form or another. It’s ironic that while it has never been easier to access vegetarian and vegan products, it’s still relatively difficult to cull such organisations from your portfolio.
Instead, why not look at individual companies that are profiting from the rising popularity of vegetarianism and veganism. There have been some stunning success stories in vegan stocks, particularly when looking at meat-free alternatives. Data from financial services group Sanlam noted that global vegan meat substitute sales hit $19.5bn in 2019. As awareness among consumers grows, UBS forecasts growth in global plant-based meat market could more than double to reach around $50bn by 2025. Consider Beyond Meat which went public in May 2019 at $25 per share. Those shares initially soared above $230, although, along with the broader market, they suffered considerably in the 2022 sell-off. There are still several smaller vegan food stocks worth looking at including The Very Good Food Company, Tattooed Chef and Else Nutrition. It could also be worth looking at the companies behind the producers. Burcon NutraScience has been involved in plant protein extraction for over 20 years and this is the basis for many vegan products.
Impossible Foods is another well-known vegan food brand. But it’s difficult to invest in as it isn’t public. It is owned by a small group of private investors, who will occasionally announce a round of financing which may be open to the public. This will often be the case with a sector in the early stages of development. So, it may be worth having a look at the Vegan Investing Club. This is a US-based outfit where there are far more investing opportunities, vegan and otherwise. Their aim is to ‘accelerate the Vegan economy and do well by doing good’. The interesting part of this is that the club will alert you to opportunities to invest in the early stages of a company’s development. This is undeniably risky, so it’s vitally important to diversify your portfolio as the club’s website makes clear. But it sounds like an interesting place to start. Also, it may be worth checking out Beyond Investing which is a vegan and cruelty-free investment platform providing access to investment products which adhere to vegan principles. The company wants to “accelerate the transition to a kinder, cleaner, and healthier world. Humanity’s reliance on animals for food, clothing, pharmaceutical, cosmetic, and other uses is inherently unsustainable in a world where the population of humans is anticipated to reach almost 10 billion by 2050”. In terms of Exchange Traded Funds, there is the US Vegan Climate ETF which seeks to track the Beyond Investing US Vegan Climate Index.
If vegan investors support plant-based start-ups, they are encouraging the type of businesses they wish to see in the marketplace while diverting capital away from others. But being vegan is not just about what you eat, as important as it is. Vegan investing is all about looking for those companies that consider animal welfare in all aspects of life. Strict vegans don’t wear clothing made from animal products, such as leather or wool, and don’t use any products that are developed from animal testing. This can make vegan investing challenging, as most ethical funds have some form of exposure to animal testing. According to Virtuvest (H/T: esgclarity.com) when applying the strictest screen of 0% exposure to animal testing, the list of funds available to UK investors shrinks to just 54, out of the 905 UK funds that consider their portfolios to be ethical in their investment approach. So, it isn’t always easy to invest ethically. But it can be done. And if the shift towards a vegetarian diet or a vegan lifestyle continues at its current pace, then it could prove to be quite profitable.