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What Investors Want from the UN Food Systems Summit

20 September 2021
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This month’s UN Food Systems Summit in New York is not just, as some describe it, an appetiser to COP26. It is fundamental to whether the world’s climate efforts in Glasgow can succeed.

Consider that the global food system is responsible for nearly a third of all greenhouse gas emissions,  or that each kilogram of cheese produced emits more than 20 kilograms of greenhouse gases.

Consider the recent sobering IPCC report that predicts the global surface temperature will continue to rise under all emissions scenarios studied, and that a 1.5°C global temperature increase will be reached by 2040 if global emissions are not halved by 2030. It becomes clear how vital it is for policy-makers to make tangible progress on the summit’s stated aim of creating a “healthier, more sustainable and equitable food system”.

I’ve spoken with investors, and here is the problem…

Increasing numbers of investors are concerned about climate risks in agricultural value chains and are taking proactive steps to mitigate that risk and build resilience against future climate shocks.

But as the $5 trillion ‘Where’s the beef’ coalition coordinated by FAIRR and backed by former UN Secretary General Ban-Ki Moon shows, governments are failing to set specific targets for reducing agricultural emissions as part of their Nationally Determined Contributions (NDCs). Investors can’t aim without a target, and we can only go so far without one.

So the summit needs to increase the pressure for clear reduction pathways in each country’s animal agriculture sector.

But we also need to ensure that the ambitious Net Zero commitments by governments and well-known food brands are filtering through to the supply chain because we haven’t found sufficient evidence to date. For example, the Coller FAIRR Protein Producer Index shows that while consumer brands such as Nestle or Mcdonald’s are making ambitious climate commitments (e.g. Nestle have committed to reaching net zero emissions by 2050), the suppliers behind them are often not even tracking GHG emissions.

In total**, three in four (78%)** of the 60 Index companies do not declare or set meaningful reduction targets for all GHG emissions (Scope 1, 2 and 3), rising to 86% among just meat and dairy suppliers. For example, Nestle currently uses suppliers like Fujian Sunner (China**), Seaboard Corporation** (US) and Cherkizovo Group (Russia) who score 1% or less on FAIRR’s GHG criteria, meaning they do not declare any GHG emissions or have no public targets to reduce them.

Investors are also keen to make big announcements around Net Zero ahead of COP26, but their success depends on robust data, transparency and a clear roadmap of emission reduction milestones from their investee companies.  The animal agriculture industry has an estimated value of over $2 trillion and in the US alone, the meat and poultry industry represented 5.6% of GDP. Calculating the Value-at-Risk of inaction on environmental and social issues is not easy, but the Food and Land Use Coalition (FOLU) estimates that the global food system generates unexpected costs of between $6-12 trillion annually.   FAIRR has estimated that if the 40 largest listed meat producers globally do not begin to manage physical and transition risk, they could also lose upwards of $11 billion in EBITDA by 2050. There is no doubt about it – there is a lot at risk.

The policy pathway

Whilst policymakers are beginning to take note, their progress is not nearly fast enough.  We need a way to fast-track the system.

According to the Climate Change Committee, the UK’s existing policies put them on track to deliver only one-fifth of the emission reductions needed by 2035. The UK government introduced new targets and have committed to reducing emissions by 78% by 2035 compared to 1990 levels. But without interim or extensive sectoral targets to get there, commitments will fall short and targets will not be met.

The UN food summit is an opportunity for leaders to develop and implement strategies to reduce agriculture’s climate footprint and lay the foundations for a new paradigm of food production – one that operates within the planet’s environmental limits. Governments must also agree and implement a clear action agenda on how to deliver on the outcomes of the summit to ensure targets are met. This will give investors the market signal they need to galvanise funding towards more sustainable food and farming practices.

So, what do investors want to see at the summit?

We know the Paris Agreement cannot be achieved without ambitious and meaningful emission reductions from the food and agriculture sector. We need a collaborative approach with robust, transparent data and metrics to create a pathway to measure the progress that we need.  The private sector is leading the way, and companies who choose to be leaders in the transition will be crafting the food system we require to feed our growing population.

As the countdown to the event begins, ESG-conscious investors will be looking for:

  1. Science-based targets – Investors want to see targets that cover the entire value chain, are aligned with the latest climate science and aimed at a 1.5-degree pathway. Companies in the food system should commit to science-based targets to show investors they’re serious about climate risk.

  2. Better data from food companies – We need to encourage, through mandatory and standardised reporting, if necessary, better ESG disclosure from food companies. Investors need gold-standard data on how companies are de-risking their operations and are responding to challenges around climate, biosecurity, working conditions and antibiotics resistance.

  3. Supportive policy for alternative proteinsProtein diversification in global diets is essential to reach Net Zero and public policies need to encourage this trend. For example, plant-based meat production causes 30-90% less greenhouse gas emissions, uses 72-99% less water, and results in 51-91% less nutrient pollution in aquatic systems. The UK government’s recent National Food Strategy recommends that the Government increases plant-based food consumption by 2030 which is encouraging, but the market will be catalysed by more national investment in research and development and more incentives for protein diversification at scale.

  4. Biodiversity and protection of nature– Current processes to meet the demand for animal protein are responsible for record levels of deforestation and biodiversity loss. The Dasgupta Review outlined that our future prosperity is reliant on both the protection and restoration of our natural ecosystems. One big step forward would be to establish clear pathways to deforestation-free supply chains for meat and dairy companies.  The finance-related discussions around the summit have highlighted the important role of finance ministries in repurposing agricultural subsidies to support climate and nature goals. This is also a topic that FAIRR investors have engaged on previously, with calls for the EU to better align its subsidies with climate and biodiversity protection.

The science is clear – and so is the market appetite for investing in sustainable food. UNFSS Finance Lever of Change will be announcing its ‘Eight Food Finance Imperatives’ in the coming days, and we look forward to working with our partners at the World Bank, the Good Food Finance Network, and others to implement practical solutions to transform the global food system. Building solutions will require international cooperation and debate, as well as the efforts of both the public and private sectors. The environmental implications of our current food system will be felt for generations to come – so it is this generation’s single greatest challenge to seize this once-in-a-lifetime opportunity for change.

FAIRR insights are written by FAIRR team members and occasionally co-authored with guest contributors. The authors write in their individual capacity and do not necessarily represent the FAIRR view.