Asia: Poor standards of factory farming creates investment risks

Asia Insurance Review
11:24' SA - Thursday, 17/08/2017
Global investors, including pensions and savings funds could face investment risks due to poor standards of food safety, antibiotic use and environmental management in the Asian meat, dairy and seafood sector, according to a new report.
The report, “Factory Farming in Asia: Assessing Investment Risks”, noted that interest in investments in Asia’s animal protein related companies has been on the rise, in tandem with the growing middle-class incomes and appetite for meat in the region. For the 12 APAC markets addressed by the report (Australia, China (mainland), India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, The Philippines, South Korea, Thailand and Vietnam), meat demand is forecast to grow 19% to 144 million tonnes by 2025.

However, significant environmental and social risks are building up in Asia’s food sector. The most recent examples are how China’s shift towards more intensive farming practices is driving up antibiotic use, the 2016/17 outbreak of the latest strains of avian flu in South Korea resulting in culls of more than a fifth of the poultry population, reducing the egg-laying hen population to a five year low.

Threats in Asia also affect the global supply chain. China’s demand for animal feed saw it import 35% of Brazil’s total soybean production last year – encouraging further deforestation in South America, with potentially enormous consequences for global carbon budgets.

The protein industry is facing a range of badly managed sustainability risks, which have significant potential to derail returns. Five key risks highlighted in the report are as follows:

- Food safety and nutrition
- Public health risk
- Environmental risk
- Animal welfare risk
- Labour standards risk

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