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

A survey of 200 investors has revealed that most (79%) expect climate change to have a ‘significant’ or ‘moderate’ impact on investment opportunities in the meat and dairy sector, with firms risking stranded assets due to poor adaptation and mitigation plans.

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

The survey, which had its results published today (12 July), was conducted by the sustainability campaigning organisation the Changing Markets Foundation. It polled 200 people working across the global investment community.

Of the survey respondents, 84% agreed that a lack of climate mitigation could lead to stranded assets in the meat and dairy sector. 61% of those interviewed called this risk “a distinct possibility” and a further 23% classed it as “very likely”.

Recent analysis from investor coalition FAIRR predicted that the twin climate and nature crises will wipe 20% off the global value of the beef industry, and 7% off the value of the dairy industry, by mid-century. Value, FAIRR stated, would be lost through a decrease in the suitable land available for these sectors. Other challenges will be sourcing food and water for livestock and creating farms that mitigate the risk of animal death from heat stress and dehydration.

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

The Foundation is using these findings to call on investors to push for better climate adaptation and mitigation plans from the food companies they invest in. On mitigation, investors are asked by the Foundation to set verified science-based emissions goals in line with a 1.5C temperature pathway, covering methane as well as carbon dioxide. Investors have already proven successful in getting these targets from some food businesses 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 targets to include specific methane reduction plans.

Covering both emissions mitigation and climate adaptation, the Foundation is calling on investors to ask food firms for “genuine agro-ecological and regenerative farming practices”, providing them with information on how they are defining these terms and measuring their climate benefits. Regenerative farming practices are designed to create improvements for local ecosystems, unlocking benefits like improved soil quality and greater carbon sequestration capacity. They are becoming increasingly popular but concerns remain about defining them and scaling them up while maintaining farmer finances.

Another form of risk mitigation the Foundation is calling for is increased investments in alternative proteins. It classifies best practice from investors as asking for the level of investments into alternative proteings and the names of all companies and projects investing in. These investments, the Foundation argues, should displace some meat and dairy production rather than simply being an add-on.

Alternative proteins boon

FAIRR has also previously called for this approach, given that climate scientists have recommended a per-capita decrease in meat and dairy consumption to deliver the necessary emissions reductions and potential adaptation benefits. Investing in alternative proteins can also limit companies’ exposure to substitution risks, as their competitors increasingly change their investments in this manner.

More recently, Boston Consulting Group (BCG) has this week published a report highlighting alternative proteins as a significant investment opportunity and an effective way to contribute to climate mitigation.

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

On the consumer piece, BCG is predicting that 11% of all meat, seafood, egg and dairy consumption will be displaced by alternative proteins by 2035. People see alternative proteins as a way to a healthier diet, primarily, the report states. They are also commonly seen as having a better climate impact. Consumers surveyed for the research were located in China, France, Germany, Spain, the United Arab Emirates, the UK and the US.

On climate impact, BCG claims that every dollar invested in alternative proteins will result in 2.5 times the emissions reductions of investing in low-carbon cement, naming alternative proteins as the most impactful climate impact in terms of emissions abatement potential.

UK Government funding

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

Issues set to be addressed in livestock production include processing waste to generate biomethane and reducing methane emissions by including additives in cow feed that hamper methane production.

The funding is being allocated through the Farming Innovation Programme, to which the Government has committed £270m of public funding through to 2029.

The commitment followed on from the publication of the Government’s proposal for the forthcoming National Food Strategy. These proposals proved almost universally unpopular, with most measures recommended through the Dimbleby review not included. Of particular concern across the UK’s green economy were a lack of commitments to scale plant-based proteins and to change land-use systems accordingly. WWF claims that 40% of the UK’s most productive agricultural land is used to grow wheat and barley to be made into food for farm animals – primarily chickens and pigs.

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