Investors worth $1tn urge US meat firms to beef up water risk management

45 leading institutional investors send letters to four of USA’s largest meat producers ahead of Thanksgiving

Some of the largest meat producers in the US are being urged by leading institutional investors to address the “significant” water risks associated with feeding, slaughtering and processing livestock.

Ahead of Thanksgiving celebrations this week, joint letters were sent to four of the biggest producers in the US meat industry – Cargill Inc, JBS, Perdue Farms and Smithfield Foods – on behalf of 45 investors with worth more than $1tn in assets under management. The letter explains how improper management of water resources poses not just a threat to the environment, but also results in litigation and reputational risks for the meat producers.

“As investors analyzing water risks in our portfolios, we believe that robust management of water quality challenges is a critical aspect of risk management in the meat industry, and one of increasing importance in the context of climate change and growing weather extremes,” wrote the investors, which are all members of US sustainability organisation Ceres.

The letter calls on the meat companies to assess the pollution impacts of their direct operations and supply chains, and also to develop a comprehensive water stewardship policy. It argues such a strategy should address how permitted releases of materials into waterways are managed, ensure safe storage and management of animal waste, and minimise fertiliser runoff from animal feed production.

Kristel Verhoef, active ownership specialist at one of the letter’s signatories ACTIAM, said: “Broad mismanagement of local water resources can lead to devastating regulatory, reputational, and litigation risks, weakening a company’s ability to operate profitably.”

Fines for violations of wastewater permits have proven costly to the industry, according to Ceres, which cited JBS being forced to pay $2m in 2010 over the failure of a facility to comply with the Clean Water Act and the Pennsylvania Clean Streams Law. JBS was also required to improve operations by reconstructing wastewater systems at an estimated cost of $6m.

The letter follows a 2015 Ceres report that ranked major food companies by the quality of their water risk management, identifying the worst performers and finding that most large food firms did not evaluate water risks in their farming supply chains at all. 

Responding to water risk concerns, however, seven global companies – including Diageo, General Mills, Hormel Foods and Kellogg – last week signed up to Ceres and WWF’s AgWater challenge aimed at boosting water use efficiency in their agricultural supply chains and supporting growers operating in high water risk regions.

“With climate change, business-as-usual management of the more than 300 million tons of manure produced annually by the US livestock industry is no longer feasible,” said Brooke Barton, senior program director of water and food program at Ceres. “Hurricane Mathew’s effects underscore the vulnerability of meat companies – and their shareholders – to growing risks stemming from large-scale water pollution events.”

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