Fast Food Giants Need To Tackle Climate And Water Risks, Investors Warn

Posted: Feb 10, 2020

$11 trillion investor coalition calls for more ambition from some of the world's biggest brands, including McDonald's, Pizza Hut and Burger King.

Severe Drought Threatens Midwest Corn Crops
Drought-hit cattle farmers are just one of the challenges fast food companies face. (Photo by Scott ... [+] GETTY IMAGES
Investors are stepping up pressure on the world’s largest fast food companies to take “faster and deeper action” to tackle the climate change and water risks in their supply chains .

The investor group, set up by sustainable investment advocacy group Ceres and FAIRR (Farm Animal Investment Risk and Return), which works with institutional investors to define the material environmental, social and governance issues linked to intensive livestock and fish farming systems, has almost doubled in size in its first year of operation, from $6.5 billion to more than 90 investors with $11.4 billion of assets under management – an indication of how serious investors consider the risks to their returns to be.

Aarti Ramachandran, head of research and engagements at the FAIRR Initiative said: “Investors are concerned about the climate impacts of our burgers and burritos. Feed for livestock alone uses around a third of annual global water withdrawals and is a major emitter of greenhouse gases. Failure by the global fast food sector to tackle the environmental issues in their supply chains puts the long-term financial sustainability of their businesses under threat. Investors are asking the industry to manage these risks, using tools such as water risk assessments and science-based emissions targets, but the companies are failing to respond at the pace and with the detail required by investors.”

The investors are engaging with Chipotle Mexican Grill, Domino’s Pizza, McDonald’s, Restaurant Brands International (owner of Burger King), Wendy’s Co. and Yum! Brands (owner of KFC and Pizza Hut). The firms are being asked to set aggressive targets to reduce their greenhouse gas emissions, water usage and their impacts on water quality through their meat and dairy supply chains.

One year into the engagement, the results show some progress across the key requests made by the investors, according to new analysis released by Ceres and FAIRR. “However, the fast food companies’ efforts thus far do not sufficiently mitigate their exposure to the considerable physical, regulatory, and reputational risks climate change poses to animal agriculture,” the investors say. “What’s more, the companies are not responding at the pace required to match the magnitude of their environmental impacts.”

Of the six engaged companies, two (McDonald’s and Yum Brands!) have set or publicly committed to set science-based emission reduction targets, in line with efforts to limit global warming to well below 2C above pre-industrial levels, with the aim of limiting warming to 1.5C. Restaurant Brands International has said it plans to set an emissions reduction target for its restaurants in the US and Canada.

McDonald’s is the only one that has publicly disclosed an assessment of its water risks specifically for meat and dairy suppliers. Restaurant Brands International plans to conduct a life-cycle assessment that will consider its water footprint, among other impacts.

By Mike Scott 
February 7, 2020
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