ESG Insights: The Promise, Opportunities and Risks of Plant-based nutrition

Our core belief is that sustainability is critical to long-term investment.  Only companies that are sustainable in the way they do business can have sustainable competitive advantages and generate long-term sustainable returns. 

We set out the key pillars of our own internal ESG framework in our January 2020 Investment Insight Our Roadmap for Sustainable Investing. This framework is vital from both a business and an ethical perspective as different stakeholders increasingly ask investors to put ESG considerations to the forefront of investment decisions.  In our January 2021 Investment Insight Sustainability³ – Reflections on a Year of ESG Implementation, we discussed how we had put this framework into action.  Together, they provide a comprehensive overview of how we have integrated ESG into our investment approach.

Going forward we intend to publish a series of follow-up Investment Insights taking a deeper look at some of the key sustainability issues affecting our investments and bringing to life some of the complexities that this work entails.

The problem: Feeding the world sustainably

One of perhaps the most complex challenges facing the world in the decades ahead is how to continue feeding an ever-expanding population whilst attenuating the environmental impact of global food production and the constraints that the food & beverage (F&B) industry is already pushing against.

Agricultural production uses 70% of the world’s freshwater supply and 50% of the total habitable land.  The global food system as a whole (including agriculture, processing, manufacturing and distribution) is responsible for up to 30% of global greenhouse gas (GHG) emissions.  Despite this significant drain on the planet’s limited resources, the global food system is still unable to feed and nourish the current population.  It is estimated that over 800 million people are hungry and that one in three people on the planet suffers from diet-related malnutrition.  At the same time, over 650 million people are classified as obese, with diet-related chronic illnesses like cancer and heart disease among the leading causes of death globally.

Animal-based diets are a key source of the problem.  Three-quarters of the world’s agricultural land is used for the rearing of livestock through a combination of grazing land and land used for the production of animal feed.  Beef is one of the biggest contributors of methane emissions due to cattle belching.  And the production of beef, pork and chicken respectively uses nine, four and three times as much water per kilogram of meat as the production of cereal does.  Yet despite this drain on resources, animal products only supply 17% of global calories consumed and 33% of global protein intake.

The challenge will become ever greater in the years ahead.  Over the next three decades, food demand is expected to increase by up to 70% as the global population increases from seven billion today to over nine billion and increasing income levels and expectations drive changes in dietary habits.  Meeting this increased demand sustainably is one of our greatest challenges today.  The alternative is grim: if we continue with ‘business as usual’, we could need up to 65% more farmland and irrigation water, increasing agriculture related GHG emissions by over 85%.  It is therefore no surprise that climate policies are exploring ways to promote plant-based diets.  For instance, the European Union’s ‘Green Deal’ will include EUR 10 billion for the ‘Farm to Fork’ strategy, which seeks to foster sustainable food production practices. 

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