The Coller FAIRR Climate Risk Model is designed as a first step to enhance forward-looking analysis on the meat sector. As a particularly carbon-exposed sector, the protein industry is a top candidate for substantial devaluation and investors failing to account for these risks will misallocate capital and investment.
In this introductory webinar, we discuss how the model will impact the profitability of meat companies due to factors such as protein substitution, demand constraints and rising costs linked to climate change. It also features a live demonstration of the online tool and a Q&A.
The IPCC warns that “livestock are projected to be adversely affected with rising temperatures” projecting “a loss of 7-10% of rangeland livestock globally” in a scenario of 2°C of warming, with “considerable economic consequences for many communities and regions”.
Whether it’s from increased electricity costs due to carbon pricing, higher feed prices due to volatile crop yields or higher livestock mortality due to heat stress, costs for meat producers will rise as temperatures do. In light of these material risks, the TCFD recommends that organisations use a 2°C scenario analysis to prepare strategically for the potentially devastating impacts of climate change.
The Coller FAIRR Climate Risk Tool takes a scenario of 2°C of warming by 2050 and analyses impacts on profitability depending on whether a company takes a regressive, market neutral or progressive approach to managing climate risk.
Using these three potential pathways, it analyses the potential upside or downside to the company’s profitability. These pathways can be adjusted according to relevant risk parameters such as increased carbon pricing affecting the meat sector and the rate of growth, innovation and adoption in the alternative protein market.
This tool is the first of its kind to illustrate climate-related financial impacts for meat producing companies in a scenario of 2-degree temperature rise in 2050. It focuses on beef, pork and chicken production and isn’t currently applicable to primary producers of dairy and aquaculture.
FAIRR has tested the model on five meat giants (JBS, BRF, Maple Leaf Foods, Tyson Foods, Minerva) with a combined market capitalisation of $50 billion (as of February 2020).
The analysis should be used as a conceptual tool that aims to give an indication of trends in financial performance. The tool doesn’t seek to predict precise company forecasts as forward-looking scenarios are inherently highly uncertain.
FAIRR members can now input their own company data to calculate impacts on profitability of protein producers in their portfolio.
Investors can input the following company-specific information based on current performance, and the tool will generate two outcomes:
- Climate progressive pathway: The potential increase in a company’s profitability if a company takes a progressive pathway
- Climate regressive pathway: The potential decrease in a company’s profitability if a company takes a regressive pathway
The Coller FAIRR Climate Risk Tool can be used to inform discussions and engagements with meat firms about how they’re preparing for climate impacts.
Venky’s India Ltd
Tyson Foods Inc
Thaifoods Group PCL
Scandi Standard AB
Sanderson Farms Inc
San Miguel Food and Beverage Inc
RCL Foods Ltd/South Africa
QL Resources Berhad
Prima Meat Packers Ltd
NH Foods Ltd
New Hope Liuhe Co Ltd
Marfrig Global Foods SA
Maple Leaf Foods Inc
Inghams Group Ltd
Industrias Bachoco SAB de CV
Hormel Foods Corp
Grupo Nutresa SA
Grupo Bafar SAB de CV
Great Wall Enterprise Co Ltd
Fortune Ng Fung Food Hebei Co Ltd
COFCO Meat Holdings Ltd
Charoen Pokphand Foods PCL
Cal-Maine Foods Inc
Bell Food Group AG
Australian Agricultural Co Ltd
Astral Foods Ltd
FAIRR publishes a wide range of research to help investors understand and manage risks and opportunities linked to intensive livestock production.
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