$20T investor network releases first-of-its-kind tool to model the financial impacts of climate change on five leading meat firms and the animal protein sector at large.
A new financial modelling tool, published today by the $20 trillion investor network FAIRR, aims to help investors understand the financial implications of climate change on the meat sector. The FAIRR Climate Risk Tool™ provides investors with an online model to help quantify potential risks and opportunities for meat companies in a climate-changed world.
The model finds that the likely physical impacts of climate change and rapid and continuing growth of alternative proteins will put billions of dollars at risk for food sector behemoths such as Brazil’s JBS (whose deforestation practices were linked most closely with the fires that devastated over 2.2M acres of the Amazon rainforest last year) and the US’ Tyson Foods — which supply household names such as McDonald’s, Walmart, Burger King and Marks & Spencer.
The new tool shows investors the rocky outlook for the meat sector — which must adapt to climate change or face collapse in the years ahead. The analysis also points to an enormous upside if the global meat sector shifts its protein mix to follow a climate-friendly path.
In an assessment of 43 of the world’s largest listed meat companies, only two (Tyson Foods and Brazil’s Marfrig) have publicly disclosed a climate-related scenario analysis, despite such an analysis being recommended by the TCFD. By comparison, 23 percent of energy and utilities companies — other huge carbon culprits — have done such analyses.
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“It’s not an acceptable strategy when it comes to this level of climate risk for the food industry to bury its head in the sand.” — Jeremy Coller, founder of FAIRR and Chief Investment Officer at Coller Capital
FAIRR’s Climate Risk Tool — based on scenario analysis aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) — identifies three pathways for animal protein companies to take, which will define the extent of their upside opportunity or downside risk:
Climate-regressive pathway: Continued focus on carbon-intensive species such as beef
Baseline (market pathway): Company grows share in both conventional and alternative proteins
Climate-progressive pathway: Company shifts towards less climate-intensive crops, species and products.
To illustrate the model, FAIRR chose five meat giants (Brazil’s BRF, JBS and Minerva, Canada’s Maple Leaf and Tyson) with a combined market cap of $50 billion (as of Feb 2020) for a pilot scenario analysis.
The model shows that the companies have the potential to see significant growth by choosing a ‘climate-progressive pathway,’ which assumes high rates of alternative protein growth. Like the growing group of fossil fuel companies hedging their bets with investments into renewable energy, more and more meat giants — including Cargill, Tyson, JBS and Marfrig — have begun investing in alternative proteins, but their long-term strategies remain focused on conventional meat production (with the exception, perhaps, of Maple Leaf — which has made a more aggressive pivot towards plant-based products).
Learn more about FAIRR’s Climate Risk Tool …