Why Investors Have a Beef With the Meat Industry

Protein is one of the building blocks of life, helping the systems of the human body to make and repair everything from hair to hormones. Quite simply it is essential to life. However if we don't start to rethink how we consume protein, we could face financial, social and environmental crisis.

What's the problem with protein?

The problem with protein lies primarily in how we produce it. At present most of the protein we eat comes in the form of meat. And approximately 70% of the world's meat is produced in factory farms - rising to 99% in the US. Yet factory farms are increasingly linked to a range of serious social and environmental consequences, from pollution to pandemics.

For example, livestock production is responsible for 14.5% of all man-made greenhouse gas emissions, which is more than the transport sector. In the wake of the Paris Agreement, policy makers must review national emissions by sector. And livestock production is one sector set for increased scrutiny. Some countries are already beginning to take action, Denmark for example is considering a meat tax to curb meat consumption, and China's health agency has urged citizens to reduce meat consumption by 50%.

Beyond emissions, animal agriculture is the number one reason for deforestation in the Amazon and one of the biggest users of water and land in the world.

Superbugs

Factory farming is also being connected to major public health risks. For example, intensive farming is the biggest global consumer of antibiotics and academic research has established that the overuse of antibiotics in livestock is helping the development of antimicrobial-resistant bacteria or 'superbugs'. It is estimated that these superbugs are already responsible for a 23,000 deaths and more than two million cases of antibiotic resistant infections every year In the US alone. They also cost the healthcare system an excess US$20bn in costs every year. By 2050 it is estimated that antibiotic resistance could cost the world $100 trillion in lost output.

Simply put, our over-reliance on meat for our protein is putting an enormous strain on the world's resources, causing unsustainable environmental damage and threatening our long-term health. And with the global population set to hit 10 billion by 2050, rethinking how we feed ourselves is becoming an urgent sustainability priority.

That is why this month Boston Common joined a $1.25 trillion coalition of 39 other investors to take action by calling on sixteen of the world's largest multinational food companies to identify their plans to respond to our over reliance on meat as a source of protein. These include companies such as Costco, Kraft Heinz, Nestlé, Unilever, Tesco, Walmart and General Mills. The coalition is encouraging the companies to set strategies to diversify into plant-based sources of protein. The coalition is brought together by the Farm Animal Risk and Return (FAIRR) initiative and NGO ShareAction.

Specifically, the coalition is asking food manufacturers to focus on product reformulation and increase research and development for plant-based proteins. It also asks major retailers to use preferential product positioning, in-store samples and advertising to increase consumer awareness of plant-based proteins.

Food-tech solutions?

Perhaps one of the most exciting answers to our protein production problem lies in the food-technology sector. Recent advances mean that companies are now able to produce 'meatless' meat (using plant-proteins to mimic the texture and flavour of meat) and clean (lab-grown) meat, with fewer negative environmental and social consequences of traditional meat.

Memphis Meats for example is working to produce its lab-grown meat balls at scale and affordably, Beyond Meat has recently released a plant-protein burger that not only looks and tastes like meat and but even bleeds, and New Wave Foods is set to supply shrimp made entirely from algae to Google campuses around the world. The meat substitutes sector is forecast 8.4% year-on-year growth for the next five years.

However, despite these exciting innovations and the impressive growth forecasts, the sector remains relatively small. And if we are going to feed 10 billion people by 2050 and stay within the 2-degree limit set by the Paris Agreement, then we need investors and food companies to stay ahead of the curve and help bring innovations to scale.

The information in this document should not be considered a recommendation to buy or sell any security.