4 minute read
ESG & ME
Sowing seeds of change as meat gets a grilling
Western consumers are increasingly scrutinising how their diet feeds into questions of sustainability. Chris Sloley asks top professionals if their investment appetites are changing too
What is the global chicken population? Have a guess – 100 million? 500 million? One billion? There are currently 23 billion chickens on the planet at any given time, with a whopping 65 billion consumed annually.
This puts the sheer scale of the meat industry into perspective, but the humble vegetable is striking back. Younger generations are consuming less meat, and the uptake of vegetarianism and veganism has accelerated, with markets such as Germany and Italy seeing huge rises in those following a meat-free diet.
A CASE IN POINT Jens Peers, CIO and CEO of specialist boutique Mirova US, says that when he took his daughter to her first day of university in the Netherlands, 80% of the new intake were vegetarians. ‘You have to consider that these people will one day be 40 and may still be choosing to shun meat. ‘What we are seeing among general populations – and millennials in particular – is that they are more socially conscious. They are drinking and smoking less or not at all and, on the whole, not consuming anywhere near the same amount of meat as the generation before.’
THE BIGGER PICTURE This trend has been picked up by asset allocators as well. John Mallon, a fund selector at Italian group Classis Capital, is among those noting how this shift is feeding into the wider discussion around sustainability.
‘The changing nature of food consumption is a key constituent of the broader sustainability debate, especially considering the outsized contribution agriculture makes to global greenhouse gas emissions,’ he says.
‘The headline that cattle emit 50% more pollution than the one billion cars on the road today is alarming, but there is little talk of stricter regulation to reduce livestock emissions, unlike the demands placed on the auto sector.’
MEAT SUBSTITUTES Mallon highlights how meat alternatives – offered by companies such as Impossible and Beyond Meat – are starting to attract attention from investors. ‘Despite the hype, there is no doubt these new players in the market are offering a compelling product, but they face a number of challenges that, perhaps, the stock euphoria ignores.
‘There is the practical issue of capacity constraints on production, such as scaling the supply chain, the necessary capex required, and renewed competition from established meat producers. This latter factor could squeeze the shelf space in supermarkets. Finally there is the regulatory risk that could threaten the “health & wellness” marketing message.’ Ultimately, Mallon believes the move towards less meat consumption, in the Western world at least, will have longerterm and positive implications. ‘Consumers’ increasing awareness combined with pressure from investors will drive food companies and restaurant chains to reduce emissions across their supply chains. We want to be on the right side of this change, but we need to take a step back to understand where we want to be positioned.’
WHICH SLICE OF THE PIE? So, how can Mallon and selectors like him take advantage of this shift? ‘There are a number of ways to access this transition, either by investing with companies that are tackling emissions from livestock at source – through additives to cattle feed and methane capture – or the more popular approach is to invest in plant-based food producers that provide alternatives to both meat and dairy products,’ he says.
With the likes of Beyond Meat coming to market with sizeable IPOs, before settling at lower levels, Mallon believes the case for similar companies to make a public move has increased. ‘We are definitely heading towards a lower emissions food chain but it’s more complex than a simplistic sustainability slogan. We want to invest with people who truly understand the forces at play, and are willing to challenge the rhetoric when necessary.’
Peers says, while this is a largely European and North American phenomenon at present, there are elements of this expanding to the emerging world – but not yet.
‘The rising middle class leads to changes in behaviour in many ways and food is a factor in that.
‘Looking at it through an ESG lens, the meat industry is resource-intense. The addition of more livestock necessitates more corn to feed them which uses more water and more pesticides and fertilisers, all of which have an impact.
‘However, it has to be viewed within the context of an entire lifestyle change rather than solely food,’ he says.
Meat-free (or conscious) funds
• US Vegan Climate ETF • Credit Suisse Responsible Consumer • CPR Invest – Food for Generations
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