This article has been translated from the original article published by Nikkei Business Publications, Inc.: https://bio.nikkeibp.co.jp/atcl/news/p1/23/06/05/10771/.
At this year’s G7 agriculture ministers meeting in Miyazaki, Japan, it was welcome to see calls for diversified supply chains and improved sustainable productivity, including agricultural innovation to reduce emissions. In particular, the G7 agriculture ministers statement stressed that the Ukraine crisis and climate change have impacted food security, and that scaling resilient and sustainable food systems is increasingly a top priority on national agendas, including the role of responsible investment. This presents opportunities for Japan’s policy and financial engagements with the food sector.
As this article will outline, Japan has played an increasingly active role in boosting food security despite measures aimed at strengthening sustainable food systems not being widely acknowledged in Japan. Co-authored by Akira Igata, a Project Lecturer at the Research Center for Advanced Science and Technology, the University of Tokyo, FAIRR’s Policy Director, Helena Wright, and Senior Policy Officer, Keenya Hofmaier, this article explores Japan’s ESG investment trends, and existing domestic and international agriculture policies concerning the alternative protein market as well as innovations in line with the G7’s vision of building sustainable food systems.
Increased ESG Investment in the Food Sector
FAIRR has reported on the increased efforts of global investors in building a more sustainable food system. According to FAIRR’s latest Protein Producer Index 2022/2023 report, 60% of the world’s largest protein producing companies - spanning meat, dairy and aquaculture - were rated as ‘high risk’ based on their greenhouse gas (GHG) emissions. On the other hand, the study found that more than half of the major protein producing companies are expanding product offerings to include alternative proteins in an effort to reduce climate risks.
Addressing these risks is also essential for continued production through the traditional livestock industry. Indeed, recent data shows that climate change risks are highly likely to affect company profitability: FAIRR’s latest Climate Risk Tool 2023 report analyses the impact of climate change on 40 major meat and dairy companies and found that the costs and profitability of these companies will be significantly affected by worsening climate change. This has been identified as a key driver of climate change’s impacts on crop productivity and supply chains, as well as increasing feed prices. These risks have also led to changes in policy as state and non-state actors heighten efforts to adapt and mitigate risks. It is expected that there will be an increase in carbon tax schemes around the world focused on businesses, and the expenditure will have a particularly large impact on the food sector, which is a major GHG emitter.
FAIRR’s Climate Risk Tool is based on three different climate scenarios. Under the 2°C or “business as usual scenario”, which assumes a global average temperature increase of around 2°C by 2100, the 40 companies analysed would face a $23.7 billion decrease in revenue between 2020 and 2030. Most alarmingly is that more than half of these companies would operate at a loss without increased measures, such as risk reduction or cost-shifting.
However, these risks can be reduced by diversifying protein production and increasing resilience to climate risks. There are positive developments on this front as we are observing an increasing trend in ESG investment encouraging that diversification: according to estimates by FAIRR and others, total government investment in alternative proteins by 2022 will exceed $800 million, and total global private investment will exceed $5 billion from the 2021 figures. Moreover, this growing international investment shift within food production is likely to continue with various ongoing initiatives in Japan in search for sustainable protein sources, such as plant-based meat alternatives and cell-based foods. In fact, in Japan, investment of $300 million from the government and about $700 million from the private sector have already been channelled to this space.
The Entry of Japanese Companies Into the Plant-Based Alternative Meat Market
In Japan, the plant-based product market is estimated to have doubled in size between 2019 and 2022, reaching a value of $271 million (¥36.9 billion). Additionally, production of plant-based meat increased by 7.2% between 2019 and 2021. As an example, Japanese consultancy Seed Planning expects the market to grow to $340 million (¥46.3 billion) by 2025.
Moreover, policy developments in Japan have been moving in parallel. In 2021, Japan’s Ministry of Agriculture published a draft vision on the promotion of food technologies, from production to processing, and distribution and consumption, as part of its contribution to the UN Food Systems Summit. Commitments from 67 key stakeholders to this draft vision showed that venture capital in Japanese startups and investment by Japanese food corporations is scaling up. In that same year, Japan also released the Measures for achievement of Decarbonization and Resilience with Innovation (MeaDRI) as a national strategy to support sustainable agriculture, forestry, fisheries, and food industries through innovation.
These developments also revealed venture capitalists’ and Japanese food manufacturers growing interest in food technology start-ups in Japan. Additionally, major food companies are also entering the alternative meat market. Marukome, one of Japan’s largest miso makers, was an early example of this innovation when it entered the plant-based market in 2015 to launch their Soy Lab brand of ground and diced meat alternatives. In 2018, Otsuka Foods launched their “Zero Meat” range of plant-based burgers and meats, and one of Japan’s largest meat processing companies – Itoham Foods – launched their own plant-based meat products in 2020. Since then, the list of companies entering the plant-based market in Japan continues to grow.
Cellular Foods and Products Are Rapidly Gaining Attention
In addition to plant-based meat substitutes, there is growing interest in cellular foods in Japan, such as cultured meat, which are animal-sourced foods directly from cell cultures.
In an address to the National Assembly (the Diet) on 22 February 2023, Prime Minister Fumio Kishida announced intentions to start developing the cell agriculture industry for cultivated meat and fish protein innovation. He stated that “foodtech, including cellular food, is an important technology from the perspective of realising a sustainable food supply”. This important landmark announcement demonstrates that Japan is well-positioned to become a global leader in sustainable food innovation illustrated by the government’s continued investment in relevant technologies enabling sustainable food production.
At the ministry level, there is also increasing support for research and development into technologies and products that may be considered ‘sustainable protein sources’, such as cellular foods and plant-based meat substitutes. These include the Ministry of Health, Labour and Welfare’s (MHLW) research into food safety standards of cellular foods, and the Ministry of Economy, Trade and Industry’s (METI) subsidies for biotechnology manufacturing. There is also the Japan Association for Cellular Agriculture (JACA), a non-profit general incorporated association officially registered in December 2022, and which includes this article’s co-author, Akira Igata, as the Director. JACA is engaged in various activities, such as promoting cooperation between industry experts, academics, and government, as well as conducting external outreach for international standardisation processes.
Japan’s developments in cellular foods are also aligned with recent global trends. In Asia, Singapore’s regulatory authority approved the world’s first cellular chicken for sale in 2020. China has also made references to “future food” in its 14th Five-Year Plan for 2021-2025. In South Korea, collaboration between industry, academics and government has gained momentum in recent years, with the establishment of the Korea Association for Cellular Agriculture (KACA) mainly led by businesses and the Korean Society of Cellular Agriculture (KSCA) to promote cell-based agriculture. In the US, the US Food and Drug Administration (FDA) declared no objections to the safety of products from two cellular food companies in 2022 and 2023. Similarly in Europe, there are ongoing large-scale subsidy projects on cellular foods at the EU level. Overall, these developments show that governments around the world are making progress towards bringing cellular food products to the market, a trend that will contribute to building a global sustainable food system.
International Collaboration on Sustainable Protein Sources
Scaling investment in sustainable food systems would bring a range of benefits, from building food and economic security to biodiversity protection and reducing climate risks. This is particularly the case in Japan, considering that plant-based ingredients have always been dietary staples in Japanese cuisine. Only in recent decades has there been an greater appetite for meat consumption. More importantly, scaling investment encourages international collaboration to achieve these goals.
For example, Ajinomoto – a Japanese multinational food company - has identified alternative proteins as a key component for its growth strategy and has begun preparations to expand its plant-derived and cell-based food offerings in anticipation of growing demand in the Japanese market. Additionally, the company invested in a business alliance with Israeli-based SuperMeat in March 2022, a cellular chicken food technology start-up. Taro Fujie, President and CEO of Ajinomoto, then announced that the company is looking into food technology by making amino acids and proteins from carbon dioxide. The company has even set a target of doubling its innovations in this space by 2030.
Japan is also attracting more international attention within the sustainable protein industry due to its potential as an alternative seafood market. For example, both Mitsubishi Corporation and Food & Life Companies - the latter of which owns the Sushiro brand - have partnered with the US-based BlueNalu to develop cellular seafood. Nippon Ham has also spent a year developing products such as fish fries and popcorn shrimp made from plant-based ingredients, including soya and seaweed. The company has plans to further expand its range of alternative protein products due to anticipated surge in demand in Asia. Furthermore, Japanese venture NUProtein agreed on a formal partnership with Singapore’s Umami Meats, with the latter engaging various Japanese companies along the entire value chain from manufacturing to trade to make the proteins required to cultivate seafood at a fraction of the current market price. Umami Meats aims to build an exhaustive network of partners in Japan to scale its cellular seafood business. With growing consumer demand for sustainable food production, innovations in this space are of increasing interest to the financial sector.
Transforming the G7 ‘Vision’ Into ‘Realisation’
As outlined, the goal of the G7 Agriculture Ministers’ Meeting in Miyazaki was to achieve common consensus on sustainable agriculture through GHG emissions reductions, innovation, and supply chain shifts. One month after they issued the Leaders' Communiqué, G7 leaders at the Hiroshima summit released the Hiroshima Action Statement for Resilient Global Food Security. This statement underlined the growing importance of a robust and resilient sustainable food system, including the essential role of responsible investment.
The vision of “building a sustainable food system” needs to be holistically implemented by governments, companies, and academics. As summarised in this article, Japan has a competitive advantage not only due to the government’s support for innovation in its sustainable food strategy, but also because Japan is a significant hub for technological innovation more broadly. Japan could be well-placed to lead on sustainable agri-food innovation.
As Japanese companies and governments begin implementing initiatives for plant-based meats to enter the mainstream market, the rise of ESG investment in alternative foods will drive increasing demand in this market. These developments point to the possibility of Japan’s leading role in related innovations. Indeed, Japan is playing an increasingly active role in the fight for global food security, considering this policy was a cornerstone of their G7 presidency, as well as the G7 Hiroshima Summit. Could Japan’s vision and leadership be an opportunity for the country to become leader in global protein innovation?