Investor network FAIRR and the Good Food Institute (GFI), a plant-based protein non-profit have launched two ESG reporting frameworks for meat alternative businesses.
- The frameworks introduce a standardised system for assessing the ESG credentials of investments in alternative protein.
- Investment in meat alternatives has skyrocketed in recent years, but has been lacking in transparency around sustainability credentials.
- Enabling ESG comparison between different protein alternatives will support the emergence of leaders in the sector while demanding improvement from those performing poorly.
It is widely acknowledged that intensive agriculture exerts a devastating impact on the world’s forests, soils and climate. The meat industry is also accused of the destruction of nature, exploiting animals and abusing human rights.
Rampant deforestation of the Amazon is principally driven by meat demand, while global food systems are estimated to contribute around a third of the world’s greenhouse gas emissions.
Furthermore, the 2021 Food System Impacts on Biodiversity Loss report released by Chatham House labels the agricultural sector as the main threat facing 86% of species at risk of extinction.
FAIRR, a global network of investors concerned about the ESG credentials of intensive livestock farming, has highlighted these concerns in its campaigns to drive action against the risks associated with investing in the food and agricultural sectors.
Alternative investment options lack transparency on material ESG risks
Alternative proteins, derived from plants or lab-grown from animal cells, are designed to provide similar taste and quality to conventional meat products while remaining cost-competitive.
Compared to intensive livestock farming, their production consumes fewer resources while generating less negative externalities such as greenhouse gas emissions or pollution.
This makes it clear that investments in such alternatives are less likely to incur the outbound material risks associated with the conventional meat industry, leading to an increase in investor demand for alternative options.
Within the food and agriculture sector, this has resulted in investment in alternative proteins increasing by an average five-year growth rate of 91% through 2021, according to the GFI.
Dedicated funds have attracted significant capital, with the Green Generation Fund having recently secured €100 million to back start-ups developing sustainable food technologies. The potential for high returns is clear, as the sector’s sales are estimated to reach up to US$1.1 trillion by 2040.
Despite this shift in market being well under way, there has been a lack of transparency and reliable data that demonstrates the better sustainability performance, or lower adjusted risk performance, of the alternative protein sector.
Standardised frameworks allow better comparison
The frameworks released by FAIRR and the GFI provide a standardised approach to reporting on ESG credentials within the alternative protein industry.
This will allow clearer comparisons to be drawn between the conventional protein sector and its emerging competition, as well as between individual companies within the value chain of alternatives to traditional meats.
Created in collaboration with major food companies, dedicated investors in sustainable food systems, investment management firms, non-governmental organisations and independent experts, the frameworks are expected to offer a robust approach to assessing and reporting the ESG credentials of the alternative protein industry.
As alternative proteins are becoming less of a side-line and entering the mainstream market, the frameworks will likely be welcomed by investors.
Work is also underway to provide consumers with more transparent food choices, exemplified by an Oxford University initiative to develop a methodology for calculating the climate impacts of multi-ingredient foods sold in supermarkets.
Such efforts could result in a food labelling system that allows buyers to make purchasing decisions based on their environmental values.
Enabling these comparisons will allow leaders to emerge within the alternative protein sector, while shedding light on opportunities for improvement and holding those performing poorly to account.