ImpactAlpha, January 26 – You’ve heard about stranded fossil-fuel assets. Get ready for stranded meat assets. The global food system is responsible for as much as one-third of greenhouse emissions; 14% comes from livestock-based agriculture alone.
“The Protein Transformation,” a new report from MSCI and impact investor Blue Horizon, found that global food companies face significant climate-transition risks from shifts in consumer preferences and public policy.
One hedge: an accelerated shift to plant-based and alternative proteins.
In a sample of 485 publicly-listed companies, the researchers found that companies that generate more than half of their revenues from plant-based and alternative proteins had 95% lower climate-transition risk across their value chains than those with smaller shares of alt-protein revenues. If all the companies in the sample generated most of their revenues from alt-protein, the report estimates that at least $295 billion in market-cap losses could be avoided in a scenario in which the world really does limit warming to 1.5 degrees Celsius.
Protein alternatives are a $290 billion market that could account for 11% of global protein consumption by 2035. Nearly half (46%) of the food companies in MSCI and Blue Horizon’s research have some involvement in the plant-based and alt-protein market, though less than 6% disclose their share of alt-protein-related revenues. Only six companies report earning more than 50% of revenues from such products, including Beyond Meat, the only company with a 100% alt-protein business. The others: Select Harvest, Jonjee Hi-Tech Industrial and Commercial, Chacha Food, Qianhe Condiment, and Foshan Haitian Flavoring and Food.
Research suggests the carbon emissions of plant-based products are anywhere between 10 and 50-times lower than from animal products. The carbon intensity of the revenues of the six leading companies was 29% lower than for the rest of the sample, the MSCI study found.
The vast majority of agrifood companies’ carbon emissions are in so-called ‘Scope 3’ emissions from suppliers and distributors rather than direct emissions from company-owned farms, factories and vehicles. The climate policy risks for such Scope 3 emissions “can be considered lower for plant-based protein producers,” the report said.
Environmental analysts have griped for years that sustainability and environmental impact claims of alt-protein companies can’t be substantiated by public data. Beyond Meat and Impossible Foods, for example, don’t disclose greenhouse gas emissions across their operations and supply chains. MSCI and Blue Horizon said they encountered “limited and non-standardized” corporate disclosures.
One obstacle: plant-based and alternative-protein-related metrics are not included in ESG reporting standards like the Sustainability Accounting Standards Board or the Global Reporting Initiative.