How to create a vegan-friendly investment portfolio

Investors can select stocks from meat substitute companies, dairy alternative manufacturers and plant-based snack producers

Veganism is a philosophy, lifestyle and socio-economic commitment that seeks to exclude all forms of animal exploitation for food or any other product such as clothing, leather or make-up.

The movement is growing rapidly in developed nations, where socially conscious consumers have the luxury of being selective in their sources of nutrition and clothing. It is further driven by concerns about the environmental impact of the meat industry.

Strictly speaking, the philosophy should also apply to a vegan’s investment portfolio, which means no meat or dairy commodities and only the stocks of animal-free companies. However, investors do not have to be a vegan to cash in on this fast-growing industry.

The rise of veganism has resulted in the proliferation of animal-free alternatives to all kinds of products, which is now a multi billion-dollar industry. The global vegan food market was valued at $15.4 billion in 2020 and is projected to grow by 9.6 per cent from 2019 to 2025, according to market research.

North America, Europe and the Asia-Pacific have the largest percentage of vegan populations. From 2012 to 2017, the demand for meat-free food jumped by 987 per cent as global awareness of animal and environmental issues increased, according to the Vegan Society.

So it is safe to say that the trend remains bullish and new innovations in the production of plant-based alternatives to meat are likely to keep coming.

The vegan food products market is divided into egg and dairy alternatives, meat alternatives, vegan bakery and plant-based snacks.

While the Middle East market is still lagging behind other regions, it is gradually catching up, with growth likely to increase by 4 per cent to 5 per cent over the next five years. In 2019, the Middle East vegan market accounted for $176 million of the almost $16bn industry globally.

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One option is to invest in start-ups with potential as an angel investor, taking on more risk for the opportunity of bigger rewards
Chaddy Kirbaj, Swissquote Bank

Investors should consider exposure to this market as part of their diversification and sustainable investment strategies, with a broad portfolio encompassing different products and stocks from various meat substitute companies, dairy alternative manufacturers and plant-based snack producers.

In general, investors could consider two options. The easy option includes buying publicly listed stocks and equities in China, Europe and the US. A good example would be the California-based meat substitute company Beyond Meat, which has a market cap of $8.4bn after its shares jumped 35 per cent in a single year.

Another example is UK-based vegan food products company Nomad Foods, with revenues of $3bn in 2020. One of the best-performing stocks, Nomad’s shares surged 41.5 per cent in a year.

The second option is to invest in start-ups with potential as an angel investor, taking on more risk for the opportunity of bigger rewards.

Investors could also consider focusing on the distribution channels of vegan food products that include speciality stores and online shops. For a broader exposure, there are many thematic exchange-traded funds (ETFs) focused on animal-free products.

A good place to start would be the Vegan Climate ETF that specialises in investments in environmentally friendly and cruelty-free companies, with $18m in assets.

On the other hand, there are many ETFs that focus on a broader environmental, social and governance (ESG) theme that usually includes ethical treatment of animals, among other elements such as green tech and fair trade. Fidelity, Vanguard and BlackRock have ESG-themed ETFs to choose from.

As usual, due diligence is key. Thorough research will enable you to choose companies that translate growth potential into share price performance and avoid ones that speak the language of ESG but are unable to materialise their commitments.

Chaddy Kirbaj is vice director at Swissquote Bank’s Dubai representative office

Updated: September 10th 2021, 4:00 AM
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