Coller FAIRR Climate Risk Tool

The material risks created by a changing climate are severe, and the global animal protein industry is increasingly vulnerable. Flooding has hit the US livestock industry, devastating fires have threatened the survival of Australian cattle and supply chain risks are harming the profitability of Brazilian beef.

Physical and transition risks in the meat sector are not priced into today’s markets. Investors need high-quality insights into how climate-related risks and opportunities will evolve across the meat industry in an era of extreme disruption.

FAIRR has developed the world’s first tool to help investors quantify the implications of climate change on the meat sector. The tool, based on TCFD-linked scenario analysis, enables investors to assess the potential downside risks and upside opportunities related to animal protein companies in a 2-degree world.

Download full report  View the Coller FAIRR Climate Risk Tool

Introductory webinar + Q&A

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 challenges of a warmer planet

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.

How does the model work?

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.

Calculate climate risk

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.

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