Vegan and plant-based companies may be of special interest to the investor looking to add some socially conscious investments to their portfolio. But many of these companies are young, untested and facing an uncertain future.
What are vegan stocks?
Vegan stocks are stocks from companies that market to vegans. Most of these companies are food manufacturers that specialize in vegan-friendly and plant-based products.
The vegan diet excludes meat, dairy products, eggs and all other ingredients derived from animals. Dietary staples include fruits, vegetables, legumes and whole grains. Publicly traded companies that exclude animal products from their offerings may be considered vegan stocks.
Why invest in vegan stocks?
A growing number of companies are qualifying as socially responsible, and more and more people are becoming interested in veganism. A 2018 report published by Statista showed that there are around 850,000 people in Canada who identify as vegan and 2.3 million who identify as vegetarian. Forbes reports that, from 2014 to 2017, the number of vegans in the US grew from 1% to 6%.
The global plant-based meat market — a hearty component of many vegan diets — was worth USD $12.1 billion in 2019 and is forecasted to reach USD $74.2 billion by 2027, according to a report from Meticulous Research.
In a 2018 market research survey, around 53% of Canadians said they eat meat alternatives with 18% claiming to eat meat alternatives several times a week. And with the Plant Based Food Association reporting that 29% of Americans now identify as flexitarians — shoppers aiming to cut back on animal-based food products — the plant-based food market is well-positioned to grow at a healthy rate.
Vegan stocks attract investors who want to back the companies and causes they truly care about. Whether you’re a vegan, vegetarian, flexitarian or simply want to support companies that refrain from selling animal products, vegan stocks are one way to introduce socially responsible investments into your portfolio.
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What unique risks do vegan companies face?
The risks facing vegan stocks are the same risks that face many new, rapidly evolving industries: instability.
This portion of the global food market is still small, to say the least. And while it’s definitely growing, it hasn’t proven itself long term. Many companies that specialize in vegan and plant-based products are startups.
And startups are an inherently risky investment. There’s no guarantee these newer companies will stand the test of time, especially considering how the coronavirus pandemic has affected the way we dine.
Beyond Meat — one of the biggest players in plant-based meat — sells half its products to restaurants. And a number of its competitors are in the same boat. In light of the pandemic, restaurants simply aren’t seeing the same numbers of patrons, even considering the shift toward takeout, pickup and delivery options.
There’s no telling how the pandemic will affect the restaurant industry long-term. And with such a large cut of plant-based company sales going to restaurants, these companies will undoubtedly be affected.
Veganism has begun to take root in American dietary trends, but these companies may be too new for the experienced investor to gamble on.
If you’re ready to add some socially conscious stocks to your portfolio, you have a few options. Some companies in this list (like Beyond Meat) only produce vegan products. Others companies lean heavily towards vegan products but may also produce some non-vegan products (like Tofutti, which uses egg whites in its Mintz’s Blintzes crepes). Research companies carefully before buying any stocks to make sure you’re comfortable with your investments.
Investors looking for a vegan-focused ETF may be pleasantly surprised to discover the U.S. Vegan Climate ETF (NYSEArca: VEGN): the first publicly traded fund to focus on vegan investments.
The U.S. Vegan Climate ETF holds over $53 million in assets and has an expense ratio of 0.60%. It’s a socially responsible fund that primarily filters out companies involved in animal products, testing, farming and animals used for sports or entertainment purposes. But the fund also exempts companies that:
Extract, refine or produce fossil fuels
Consume fossil fuels for energy
Have a significant carbon footprint
Have a history of environmental habitat destruction
Produce tobacco
Produce armaments and products designed for military or defense use
Have a history of human rights abuses
As of May 2021, the US Vegan Climate ETF (NYSEArca: VEGN) held 284 companies, including Apple, Microsoft, Tesla and UnitedHealth Group Incorporated.
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Bottom line
For those ready to add some plant-based investments to their portfolio, vegan stocks represent an investment opportunity on the rise and gaining momentum. But most companies in this industry have plenty more ground to cover before they can be considered a stable investment.
Are Beyond Meat products vegan? Yes, Beyond Meat products are 100% vegan-friendly. Check out our guide to investing in Beyond Meat if you’re interested in backing this company.
How can something be considered a vegan stock even if they sell animal products? Vegan pure plays — companies that exclusively offer vegan products — are rare. In fact, most of the U.S. Vegan Climate ETF’s top 10 holdings are tech companies that don’t offer vegan products: like Intel, AT&T and Microsoft. A stock can be considered a vegan stock if it offers vegan or plant-based products or if it offers products that don’t exploit animals.
But be careful: Some companies considered to be a vegan investment offering plant-based foods may also manufacture meat products. If you follow strict ethical investment guidelines, carefully research companies’ products and processes before buying any stocks.
What is veganism and how does it work? Veganism is a lifestyle characterized by the exclusion of animal products from material purchases and food consumption. Veganism aims to limit animal cruelty and the environmental impact of animal exploitation.
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Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga.
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