8 in 10 meat and dairy investors fear stranded assets due to climate inaction

The survey, the results of which were released today (July 12), was conducted by sustainability campaigning organization the Changing Markets Foundation. He interviewed 200 people working in the global investment community.

Among survey respondents, 84% agreed that a lack of climate mitigation could lead to stranded assets in the meat and dairy sector. 61% of respondents rated this risk as a “certain possibility” and 23% rated it as “very likely”.

A recent analysis by the FAIRR investor coalition predicted that the twin climate and natural crises will wipe out 20% of the global value of the beef industry and 7% of the value of the dairy industry by mid-century. Value, FAIRR said, would be lost due to a decrease in suitable land available for these areas. Other challenges will be finding food and water for livestock and creating farms that mitigate the risk of animal mortality from heat stress and dehydration.

In the Changing Markets Foundation survey, 79% of respondents anticipate a ‘moderate’ or ‘significant’ impact on the meat and dairy industry and related products and investment opportunities in years and decades coming.

The Foundation uses these findings to call on investors to push for better climate adaptation and mitigation plans from the food companies in which they invest. On mitigation, the Foundation asks investors to set science-based, verified emissions targets in accordance with a 1.5C temperature pathway, covering methane as well as carbon dioxide. Investors have already been successful in securing these targets from some food companies in recent times, including Chipotle Mexican Grill, Domino’s Pizza, McDonald’s, Restaurant Brands International (owners of Burger King), Wendy’s Co. and Yum! Brands (owners of KFC, Pizza Hut and Taco Bell).

The Foundation wants these goals to include specific methane reduction plans.

Covering both emissions mitigation and climate adaptation, the Foundation calls on investors to ask food companies for “true agro-ecological and regenerative farming practices”, providing them with information on how they define these terms and measure their climate benefits. Regenerative farming practices are designed to create improvements for local ecosystems, unlocking benefits such as improved soil quality and greater capacity for carbon sequestration. They are becoming increasingly popular, but concerns remain about defining and scaling them while preserving farmers’ finances.

Another form of risk mitigation the Foundation is calling for is increased investment in alternative proteins. It categorizes investors’ best practices as asking for the level of investment in alternative proteins and the names of all the companies and projects in which they invest. These investments, according to the Foundation, should displace some meat and dairy production rather than just being a supplement.

Benefits of Alternative Proteins

FAIRR has also previously called for this approach, given that climate scientists have recommended a per capita decrease in meat and dairy consumption to provide needed emission reductions and potential adaptation benefits. Investing in alternative proteins can also limit companies’ exposure to substitution risks, as their competitors increasingly modify their investments in this direction.

Most recently, Boston Consulting Group (BCG) released a report this week highlighting alternative proteins as a significant investment opportunity and an effective way to help mitigate climate change.

The report reveals that globally, capital invested in alternative proteins was 124% higher in 2021 than in 2020, with investments last year exceeding $5 billion. Investors are keen to meet consumer demands, BCG says, as well as meet their own climate commitments.

When it comes to consumers, BCG predicts that 11% of all meat, seafood, egg, and dairy consumption will be replaced with alternative protein by 2035. People see alternative protein as a way to have a healthier diet, primarily, the report says. They are also generally considered to have a better impact on the climate. Consumers interviewed for the study were located in China, France, Germany, Spain, United Arab Emirates, United Kingdom and United States.

Regarding climate impact, BCG says that every dollar invested in alternative proteins will result in 2.5 times the emission reductions of investing in low-carbon cement, designating alternative proteins as the most significant climate impact in terms of emission reduction potential.

UK government funding

The reports from BCG and the Changing Markets Foundation come just days after the UK government announced a £12.5million investment in R&D for more sustainable ‘farm-grown’ proteins – a term that covers crops to based on plants like beans and peas but also more sustainable methods of raising livestock for meat, dairy and eggs.

Issues to be addressed in animal production include treating waste to generate biomethane and reducing methane emissions by including additives in cow feed that inhibit methane production.

Funding is being allocated through the Agricultural Innovation Program, to which the government has committed £270 million in public funding until 2029.

This commitment follows the publication of the government’s proposal for the next national food strategy. These proposals proved almost universally unpopular, with most of the measures recommended in the Dimbleby review not included in them. A particular concern in the UK’s green economy was the lack of commitments to scale plant proteins and change land use systems accordingly. The WWF says 40% of the UK’s most productive farmland is used to grow wheat and barley for processing into feed for farm animals – mainly chickens and pigs.

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