Greed isn’t good: the climate challenges posed by feeding the planet

Isabella Hervey-Bathurst

Isabella Hervey-Bathurst

See all articles

A monumental shift in how we produce and consume food - particularly protein - is needed if we are to avert dire climate consequences. This shift creates risks and opportunities for investors all the way from farm to finished product. Looking firstly at the challenges, it is clear that traditional livestock farming faces a looming sustainability crisis.

The demand for protein is increasing. The global population is expected to reach almost 10 billion people by 2050, requiring an almost doubling of food production.

Rising incomes and population growth in developing countries are driving demand for meat in particular. Global consumption of beef, veal, poultry and pork is estimated to have risen by 30% in the last 15 years and the trend is expected to continue.

Unless this trend for increased livestock production and consumption is significantly decreased, agriculture will use up the whole world’s carbon “budget” by 2050. Livestock farming currently accounts for 14.5% of global greenhouse gas (GHG) emissions and is an inherently inefficient process for creating protein. Even chicken – the most efficient source of meat – only converts about 20% of gross feed energy into animal protein. As it is unrealistic to expect every other sector to become carbon neutral, it is clear that dietary patterns must change.

Farming also faces growing physical risks driven by climate change. Whilst we continue to try to extract ever greater yields from farming to feed the growing population, farmers will increasingly face physical risks to their output:more droughts, lower water availability and the negative impact of more extreme temperatures on animal health.

Carbon produced per ton protein consumed

Production of animal based foods is generally more impactful on the planet than plant based foods

Chart showing per ton of protein

Whilst these challenges paint a bleak picture, some recent trends give us cause for hope, and suggest disruption is on the horizon for the way we currently produce and consume food.

On the supply side, innovation in food is expanding and advancing the range of animal-free proteins available. Memphis Meats is using cell culture technology to grow “real meat” in its labs. Its protein products consume 1% of the land and 1% of the water compared to traditionally-produced meat. Companies like Beyond Meat and Impossible Foods are using advanced plant-based protein technology to isolate components from the plant world which can recreate the taste and texture of meat. Whilst some of these companies are yet to commercialise, the scale of their cost reductions and the speed of their technological development suggests widespread adoption may not be far away.

On the demand side, millennial dietary habits are making a break from previous generations. There is a growing trend of millennials adopting ‘flexitarian’ and meat-free diets.

According to a 2017 survey, 30% of US millennials eat meat alternatives every day, driven partly by environmental concerns, but largely to improve health, manage weight and “eat clean” (eat unprocessed foods), according to research from Nielsen.

Last year more people signed up for ‘Veganuary’ (abstaining from consuming animal products during January) than the previous four years combined. With sales of plant-based meat alternatives growing at twice the rate of processed meat, according to research and Markets (2017), there is a huge market opportunity for companies which can capitalise on this trend.

Regulations and public advice are also changing. Governments are starting to take responsibility for persuading citizens to consume less meat. Motivated primarily by public health objectives (red meat consumption has been linked to increased risks of contracting non-communicable diseases like diabetes and cancer), several countries such as the UK and France have rewritten their dietary guidelines to recommend people reduce their meat and dairy intake. With a sharper focus on the climate impacts, Denmark is even considering putting a tax on red meat. Could other countries adopt a similar approach?

In summary, sustainably feeding the growing population over the coming decades is a massive global challenge. A fundamental shift in how we produce and consume food will have to occur if we are to keep global temperature rises below 2oC as pledged in the Paris Climate Change agreement. This shift produces risks and opportunities for companies (and investors) across the food production value chain.

Schroders is a member of the FAIRR (Farm Animal Investment Risk & Return) network.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.