Investing in vegan stocks
It’s a socially responsible investment in a growing niche, but can it stand the test of time?
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Vegan and plant-based companies may be of special interest to the Australian investor looking to add some socially conscious investments to their portfolio. But many of these companies are young, untested and facing an uncertain future. Read on to learn about vegan stocks and investment opportunities in the industry.
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?
It’s a growing industry that’s adding companies that qualify as socially responsible investments, and more and more people are becoming interested in veganism. The global plant-based meat market — a hearty component of many vegan diets — was worth $US 12.1 billion in 2019 and is forecasted to reach $US 74.2 billion by 2027, according to a report from Meticulous Research. With this in mind, it's no surprise that the plant-based food market is well-positioned to grow at a healthy rate.
In addition to a positive growth forecast, vegan stocks qualify as socially responsible investments. Socially responsible investments support companies that aim to have a positive social or environmental impact. This type of investing has become more popular in recent years and gives investors the opportunity to support companies and causes they truly care about. Whether you’re a vegan, vegetarian, flexitarian or just want to support companies that refrain from selling animal products, vegan stocks are one way to introduce socially responsible investments into your portfolio.
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 the plant-based meat space — 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 Australian dietary trends, but these companies may be too new for the experienced Australian investor to gamble on.
If you’re ready to add some socially conscious stocks to your portfolio, you have a few options. Do note that most of these stocks are available on US exchanges, which are available for purchase through some Australian brokers. To purchase US stocks, you'll need to open a share trading account.
What ETFs track vegan companies?
Australian investors looking for a vegan-focused ETF may be pleasantly surprised to discover the U.S. Vegan Climate ETF (VEGN): the first publicly traded fund to focus on vegan investments.
The U.S. Vegan Climate ETF holds over $US 18 million in assets and has an expense ratio of 0.6%. 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 U.S. Vegan Climate ETF holds over 200 companies, including Apple, Microsoft and Facebook.
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Before you can invest, you’ll need a brokerage account in Australia. Explore your platform options below.
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Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
For Australians 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.
Review your platform options across multiple providers to find the brokerage account that meets your needs.
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