The world’s meat industry must adapt to the challenges posed by climate change and growing demand for plant-based alternatives or face ruin, according to FAIRR, a group of investors managing $20 trillion in assets.
As a leading contributor to global carbon emissions, through deforestation and the methane produced by livestock, the meat sector faces a particularly acute risk, but has yet to act in a meaningful way, the investor group says.
In an assessment of 43 listed meat companies, only two have publicly disclosed a climate-related scenario analysis. By comparison, 23% of oil and gas, mining and utility companies have undertaken this sort of climate scenario analysis.
FAIRR is providing investors with an online model to help quantify potential downside risks and upside opportunities for meat companies in a scenario of 2°C of global warming – the upper-temperature limit agreed by the international community under the Paris Climate Change Agreement. Jeremy Coller, Founder of FAIRR and Chief Investment Officer at Coller Capital, said:
“Investors can see the inescapable truth for the meat sector is that it must adapt to climate change or face ruin in the years ahead. It’s not an acceptable strategy when it comes to this level of climate risk for the food industry to bury its head in the sand.”
“Conversely, there is also an appetizing prospect of enormous upside if the world’s meat companies shift their protein mix to align with a climate-friendly path,” he added.
New Tool Maps Key Risks
The new Climate Risk Tool created by FAIRR provides investors with an online model to help quantify potential downside risks and upside opportunities for meat companies in a scenario of 2°C of global warming. The tool is based on scenario analysis aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
The model finds that the likely physical impacts of climate change and rapid growth of alternative proteins will put billions of dollars at risk for current food sector giants such as Tyson Foods and JBS, suppliers to household names such as McDonald’s, Walmart, Burger King and Marks & Spencer.
The model identifies 7 key risks that will impact the profitability of the meat sector in the IPCC’s scenario of a 2°C warmer world in 2050. Risks include the increased cost of electricity due to carbon pricing, higher costs of feed due to poor crop yields and increased livestock mortality due to heat stress.
In addition, by 2050 alternative proteins such as plant-based burgers are projected to account for at least 16% of the current meat market, according to FAIRR‘s model forecast, rising to 62% depending on factors such as technology adoption rates, consumer trends and the potential imposition of a carbon tax on meat.
SOURCE United Nations Climate Change