Why institutional investors are calling for a protein shake-up

This week IR professionals at 16 of the largest food multinationals will have opened letters from a new $1.25 tn coalition of institutional investors asking their company to set out how they plan to meet expanding demand for protein from a growing and increasingly affluent global population – without doing enormous damage to the environment and public health.

The problem with protein

The problem with protein lies in how we produce it. Currently, most of the protein consumed in the world comes from meat, and 70 percent of the world’s meat is produced on factory farms. But while factory farms are able to produce cheap and efficient meat, they are increasingly being linked to a number of serious environmental and social issues. 

For example, they are the biggest consumers of antibiotics globally and research indicates that overuse of antibiotics in livestock is causing the development of antibiotic-resistant bacteria or superbugs. It is estimated that by 2050 drug-resistant infections could cost the world as much as $100 tn in lost output.

On the environmental side, livestock production accounts for 14.5 percent of global greenhouse gas emissions (more than the transport sector) and has become the leading cause of deforestation in the Amazon. It is also one of the biggest users of water and land in the world, and a recent study from Oxford University suggests the public health and environmental expenses associated with increased demand for meat could cost up to $1.5 tn globally by 2050.

Simply put, we are over-reliant on unsustainable factory farming methods to provide our protein. If not addressed, this over-reliance is a recipe for a financial, social and environmental crisis. 

But opportunities are also emerging

Like any risk, the protein production problem also presents forward-looking companies and investors with opportunity. Recent research by the Farm Animal Investment Risk and Return (Fairr) Initiative highlights plant-based proteins as one of these areas of emerging opportunity.

For example, food-tech companies such as Impossible Foods and Beyond Meat have developed plant-based proteins with the taste and texture of meat but without the negative environmental and health consequences. And Fairr’s research indicates the plant-based protein sector is set to grow by 8.4 percent year on year for the next five years.

What are the investors asking companies to do?

With these risks and opportunities in mind, the investors brought together by Fairr and responsible investment organization ShareAction have asked 16 leading multinational food companies including Kraft Heinz, Mondelēz, Nestlé, Unilever, Tesco, Walmart and General Mills to help create a sustainable food system and future-proof their businesses through:

• Investment in product reformulation to reduce animal-based ingredients and increase the use of more sustainable sources of protein
• Promotion of non-animal sources of protein both in-store and online (including preferential positioning, appealing packaging and improved labelling)
• Ensuring alternative protein products are competitively priced
• Investment in programs to help raise awareness of the benefits of more sustainable diets.

If we are going to meet the world’s sustainability challenges, companies need to look deeply at these problems both from a strategic viewpoint and down the breadth of their supply chain. Investors will be looking to IR professionals to help meet this challenge and ensure companies have the chance to put themselves at the forefront of product innovations. That will help protect people, planet and profits.

Alan Briefel is executive director of Fairr