Abstract
This article uses interviews with responsible investment professionals to examine the extent to which institutional equity investors, and specifically ‘universal owners’ with highly diversified shareholdings, engage with public issues associated with livestock agriculture. As share ownership becomes increasingly concentrated, and the market for Environmental, Social and Governance investment products grows, these investors are increasingly involved in governing the activities of publicly traded corporations (including leading agribusinesses). This paper brings together political economy and marketization studies research to explore how universal owners become concerned about particular environmental and ethical problems, why they overlook other public concerns, and in what ways their selective engagement with ethico-political issues might be altering the content of food politics. Comparing universal owners’ engagements with farm animal welfare issues and with tropical deforestation within animal feed supply chains, we argue that these institutions engage with tropical deforestation because it presents a financially material risk to
Generated Summary
This article examines the role of institutional equity investors, particularly ‘universal owners’ with diversified shareholdings, in engaging with public issues related to livestock agriculture. The research employs interviews with responsible investment professionals to explore how these investors address environmental, social, and governance (ESG) concerns within the context of asset manager capitalism. The study brings together political economy and marketization studies to analyze how universal owners become involved in addressing certain environmental and ethical issues, while overlooking others. The central aim is to understand how the selective engagement with specific ethico-political issues, such as farm animal welfare and tropical deforestation, alters the dynamics of food politics. The research employs a marketization studies approach to scrutinize how and why universal owners perceive environmental and social issues as costly economic externalities, considering their potential impact on financial markets. The study investigates how the calculative technologies of ESG investment shape universal owners’ engagement with environmental and social issues, while also exploring how this process might reshape the content of financial markets and the nature of political debate under asset manager capitalism. This approach seeks to clarify the conditions under which financial institutions might consider and act upon ethico-political issues in the context of their investment decisions, and what implications this may have for the broader political economy of food systems and their relation to environmental concerns.
Key Findings & Statistics
- In 2021, an estimated $596 billion was invested into sustainable investment products.
- By 2018, the three largest asset management firms in the US (BlackRock, Vanguard, and State Street) held an average combined ownership stake in S&P 500 companies of over 20%.
- By 2016, the USA’s five largest asset managers had accumulated combined shareholdings of 10–30% in many major agribusiness corporations.
- In 2021, the GICFAW’s annual collaborative shareholder engagement campaign had gained 39 members, representing a combined total AUM of £2.1 trillion.
- By 2020 over $35 trillion of assets, approximately 36% of total Assets Under Management (AUM) across major developed markets, were being managed under ESG principles.
Other Important Findings
- The study finds that universal owners are increasingly involved in governing the activities of publicly traded corporations, including leading agribusinesses, as share ownership becomes increasingly concentrated.
- The research suggests that universal owners’ engagement with tropical deforestation is more pronounced due to its association with systemic risks, particularly climate change, making it a financially material risk.
- Universal owners’ engagement with farm animal welfare is less prevalent because it is perceived as a sector-specific issue, thus not posing a significant systemic risk to their investment portfolios.
- The study highlights that the selective engagement of universal owners with environmental and ethical issues is influenced by the calculative technologies and practices of ESG integration, particularly the emphasis on financial materiality.
- The authors argue that the marketization of environmental and social issues involves the construction of new calculative devices and practices, such as ESG benchmarks and ratings, which redefine what constitutes financial risk and what falls outside this scope.
- The article points out that the increasing success rate of deforestation-related shareholder resolutions suggests a growing acceptance among institutions that exposure to tropical deforestation poses a material risk to the future performance of their portfolios.
Limitations Noted in the Document
- The study acknowledges that the focus on specific cases, such as farm animal welfare and tropical deforestation, limits the generalizability of the findings to all ESG issues or all contexts of asset manager capitalism.
- The research relies on interviews with a specific set of actors (investment professionals), which may introduce biases based on their perspectives and priorities.
- The article recognizes that the financial materiality of environmental and social issues can be difficult to demonstrate, which may affect the extent to which investors prioritize these concerns.
- The research is limited by the availability of consistent and comprehensive data on the financial impacts of ESG issues, which constrains the ability to fully assess the relationship between these issues and financial performance.
- The study’s conclusions are based on observations made in a particular time frame (2021) which may limit the long-term validity and applicability of the findings.
Conclusion
The study concludes that universal owners’ selective engagement with environmental and social issues, particularly in the context of livestock agriculture, is shaped by their focus on maximizing the performance of markets and their reliance on ESG integration. This approach often leads to a prioritization of issues that present systemic risks to the financial performance of their portfolios, such as deforestation, while neglecting those that are specific to individual sectors, like farm animal welfare. As the authors point out, “In classifying sector-specific issues such as farm animal welfare as being immaterial to the financial performance of universal owners’ portfolios, ESG integration arrangements excuse these influential investors from taking these concerns into account within their investee engagement programmes.” This selective internalization process suggests that the increasing prevalence of ESG investing is not automatically leading to a broader inclusion of ethical and environmental concerns in financial decision-making. The authors stress that the marketization of environmental and social issues does not necessarily lead to a more ethical or sustainable financial system, but instead transforms and potentially narrows the scope of what is considered relevant to financial actors. The key takeaway from this is that the definition of financial materiality, as determined by ESG integration, plays a crucial role in determining which issues are internalized and which are excluded, impacting the evolution of food politics and the broader relationship between finance, ethics, and the environment. In line with this, the article calls for greater attention to the ways in which the evolving technologies and practices of economic calculation are reshaping the boundaries of what is considered financially material, and what is not. “Examining the processes through which internalization into such markets reshapes public issues thus presents opportunities to understand what new erasures and externalizations these efforts to concern financial markets might occasion (and which old ones they reproduce) – and perhaps to contest the forms of neglect which they engender.”