Search
Close this search box.

What to watch out for when investing vegan

a vegan investor typing on a laptop on a table

Investing in veganism is not only a moral choice, it is also a smart financial choice. However, like any other investment, it comes with its own set of risks and challenges. It is important to be aware of these potential pitfalls before investing in the vegan industry.

If you want to invest in vegan companies, it’s important to do your research and make sure the companies you choose are in line with your principles.

In this article, we discuss what to look for in vegan investing and how to align your investments with your values and financial goals. Whether you are an experienced investor or just starting out, this guide will provide valuable insights into the world of vegan investing.

How to research and find vegan companies

Investing in vegan companies requires careful research and a commitment to aligning your financial decisions with your ethical principles. As a vegan investor, you will probably want to prioritise companies that adhere to strict vegan criteria, such as avoiding animal testing, not using animal-derived ingredients, and maintaining high kitchen and hygiene standards.

Cruelty-free investing

One way to ensure your investments align with your values is to focus on cruelty-free investing. This entails making investments in organisations, funds, bonds, and other financial instruments that oppose animal exploitation and suffering, as well as the destruction of their natural habitats. It is therefore a strategy of exclusion.

Exclusion of certain sectors

Data on whether companies are fully vegan is rare. You can start your cruelty-free investment journey by identifying companies that do not test cosmetics, toiletries and other household products on animals. PETA’s Caring Consumer Database is an excellent resource for this information.

However, it is rare for a sector or industry associated with animal exploitation to have policies and procedures in place to ensure that they are fully vegan. Sometimes a vegan company may be part of a larger conglomerate that is not fully vegan. For this reason, many vegan investors simply choose not to invest in stocks or funds that include sectors where known animal cruelty is still widespread, such as the food, clothing or entertainment industries.

Examining ETFs and mutual funds

When researching mutual funds, it’s important to review their specific screening guidelines and top holdings to ensure they align with your cruelty-free investment goals. Don’t hesitate to express your commitment to cruelty-free investing to your broker, financial advisor and fund company representatives, as this can help create more demand for rigorous cruelty-free investment options.

However, due to indexing rules, most ETFs and mutual funds are forced to invest in companies that are included in the benchmark index. Because these indices tend to include companies based on size rather than other factors, they are likely to include non-vegan companies simply because they have allocations to food or textiles.

Even companies that score highly on ESG or other sustainability metrics are unlikely to be vegan if they are part of the food, beverage or clothing industry.

For a fully vegan and diversified investment, look at the US Vegan Climate ETF (VEGN), which invests in pure-play vegan companies and has a comprehensive restriction policy. If you are looking for individual stocks to invest in, you can also look at the holdings of the VEGN ETF to identify companies that would fit into your investment universe.

Investing into companies which drive vegan change

For a more diversified approach, you can invest in venture capital trusts (VCTs), investment trusts and individual companies focused on the plant-based foods market. These investment vehicles can provide exposure to private, unlisted companies and reduce risk by holding a variety of investments in different sectors.

Well-known companies in the plant-based foods sector include Ingredion, which supplies plant-based ingredients to vegan product manufacturers and is recognised for its ethical practices. Other plant-based food stocks of various sizes and types may also be considered for investment.

Idiosyncratic risks and opportunities for vegan investors to be aware of

Investing in vegan businesses presents a number of specific risk factors and opportunities that are different from investing in other industries. We have compiled a list of factors to watch out for.

Market and competition

The vegan food market is becoming increasingly competitive, with new companies and products entering the market on a regular basis. Investors should carefully evaluate the unique selling points and competitive advantages of the companies they are considering investing in.

Innovation in food technology

The development of new food technologies, such as cultured meat and fermented proteins, could disrupt the traditional vegan food market. Investors should keep abreast of emerging technologies and consider investing in companies that are at the forefront of innovation.

Environmental and ethical standards

Consumers are becoming increasingly aware of the environmental and ethical impact of their food choices. Companies in the vegan market should adhere to high environmental and ethical standards to maintain consumer confidence and ensure long-term success.

Regulatory changes

As the vegan market continues to grow, there may be increased regulatory scrutiny and potential changes in legislation that could impact the industry. Investors should monitor any developments in this area and consider how they may affect their investments.

Overall investment principles to watch out for and appy

Finally, there are some general investment principles that are even more important when investing vegan, as you have to exclude many companies from your investment universe, which tends to increase the risk of your portfolio.

Diversification

To reduce risk, you should diversify your vegan investment portfolio by including a mix of companies within the vegan market and other industries that are not driving vegan change but are not directly harming animals. Examples include many companies in the technology and service sectors.

Long-term investment approach

The vegan market is expected to continue to grow in the short term, but there are bound to be fluctuations, and the last few years in particular have not been kind to vegan investors as companies have struggled to grow as quickly as expected and the overall market has been quite volatile. You should take a long-term investment approach and be prepared for potential market volatility.

In conclusion, investing in vegan companies requires careful research and a commitment to aligning your financial decisions with your ethical principles. By focusing on cruelty-free investing and considering diversified investment options, you can support your values and contribute to a more compassionate world.

Table of Contents

More Stories

Get Your Beyond Times Brew

Once a month, all the vegan news around vegan food tech and material tech.