Making the Argument

No investor would ignore environmental, social and governance (ESG) risks in sectors like coal or transport. Yet in one of the world’s largest sectors (i.e., food) investors are often blind to the material environmental and social issues shaping the industry, particularly in relation to animal protein production. The FAIRR Initiative was founded to help close that blind spot, protecting investor returns and building a more sustainable food system.

In its landmark 2015 report, FAIRR identified 28 ESG issues that affect production and pricing, market access, corporate reputation and legal and regulatory action for companies across the food and agriculture value chain. Applying our initial research to global food companies, in 2018 we published the inaugural Coller FAIRR Protein Producer Index – the world’s first assessment of 60 meat, dairy and fish producers on critical sustainability risks.

The Impact of Animal Farming

70 %

of food animals globally are raised in intensive farming systems (99% in the US)

14.5 %

of greenhouse gas emissions come from livestock production – more than the transport sector

$100 trillion

of value at risk by 2050 due to antibiotic resistance.

Environmental Issues

The world is consuming ever more animal protein. Global meat consumption has increased by around 75% since 1990. In the next ten years, demand is expected to rise by 13%, and in 2050 by 80%. Such booming growth attracts investors, but the industry is also facing a number of rapidly intensifying sustainability threats.

Meeting future demand for meat, fish and dairy products requires an unfeasible amount of water, land and greenhouse gas emission to be used or released. Livestock and fish production consumes 83% of global arable land, but provides just 37% of the world’s protein and 18% of global calorie consumption. One report estimated that 70% of deforestation in the Amazon basin can be attributed to the beef industry. Global forests, once a crucial carbon sink, have been cut down at such an alarming pace that they are now a net contributor to GHG emissions.

Public Health

Around 70% of medically important antibiotics produced in the US are used in livestock production, to prevent disease spreading between animals in confined spaces. The widespread use of antibiotics on intensive farms is catalysing the emergence of antibiotic-resistant bacteria, which threaten the effectiveness of antibiotics in human medicine. A UK government review found that antibiotic resistance could cause 10 million deaths a year and cost the world up to $100 trillion in lost output between now and 2050.

What Does This Mean for Investors?

While the animal protein sector is expected to continue growing in the short term, natural resource constraints may dampen expansion in the long term. A 2018 study from the University of Oxford found the average world citizen needs to eat 75% less beef, 90% less pork and half the number of eggs to keep climate change under 2 degrees Celsius.

The food sector is increasingly ripe for disruption. FAIRR’s work helps investors and companies to manage risks and seize opportunities for sustainable growth in an uncertain climate.

Case Studies

How leading global investors are factoring intensive farming issues into their investment processes.

Case Study

ACTIAM is a responsible fund and asset manager based in the Netherlands, with €52 billion in assets under management. They were one of the…

1st May 2019 | aarti