Investing beyond meat

Investing beyond meat

Clean energy tends to dominate the climate conversation, but the shift toward more sustainable diets is also gathering pace, argues Martyn Jones of Liontrust’s Sustainable Future UK Growth Fund

While energy continues to dominate the emissions debate, it is increasingly clear that changing global diets will be another integral part of any shift towards a more sustainable world. Until recently, obesity and health concerns were the main drivers in moving better diets up the global agenda but we are now seeing growing awareness of the environmental damage caused by meat production.

An element of meat shaming is also creeping in at the edges: F1 star Lewis Hamilton recently went on record to say going vegan is the only way to save the planet, for example.

Data show the opposing forces at work in this sector however, potentially along generational lines: figures from consultant AT Kearney put the global meat market at $1tr in 2018 and yet a YouGov survey revealed one in five young adults believe the future will be meat-free.

A couple of facts are central to our thinking on this. First is that by 2050, the global population is expected to reach 10 billion and it looks impossible for that many people to eat the amount of meat typical in Western diets while keeping within the world in line with the UN’s Sustainable Development Goals (SDGs) for the environment. Equally clear is that protein is a vital part of a healthy diet, essential for growth and repair of the body. Based on our scenario of a 10 billion global population consuming 80g per day – the current average – there would be a 33 per cent increase in protein demand by 2050.

Figures from show that for the average UK adult, a majority of their protein – 64 per cent – comes from meat, fish and dairy. Yet, food and farming are responsible for a quarter of total global emissions and the livestock industry, primarily meat and dairy, makes up a significant share of that.

At the heart of this sizable carbon footprint is the feed sector, producing the food for the animals that dominate many of our diets. Red meat from cows, sheep and goats is a particularly large source of greenhouse gases due to the methane produced in ruminant digestion. It is irrefutable that creating animal protein has an enormous environmental impact.

Given all these factors, a recent report from independent think tank RethinkX has claimed we are on the cusp of the deepest, fastest and most consequential disruption of food and agricultural production since the first domestication of plants and animals 10,000 years ago – and the driving force of this is what is known as protein disruption.

According to the think tank, the cost of proteins could be five times cheaper than existing animal proteins by 2030 and 10 times cheaper by 2035. Even if these figures prove optimistic, the crucial factor for our theme of Delivering healthier foods is that these alternative proteins are expected to be more nutritious, healthier, better tasting and more convenient.

Alternatives to meat-derived protein currently fall into two camps – plant and insect. Figures from Mordor Intelligence predict the global market for these will hit $8.2bn and $1.1bn respectively by 2023, so we are clearly in the early days of growth for both.

There is nothing like as much in the news about the impact of meat and dairy production as on renewable energy or transport emissions, but we feel addressing this situation can have a similar impact on climate change. We expect the same contribution from innovative companies working in livestock, meat and dairy as we have seen in sustainable energy.

Moving away from traditional agricultural models is projected to bring massive environmental benefits, reducing net GHG emissions and also improving deforestation and aquatic pollution from animal waste, hormones and antibiotics.

As a counterpoint to this, we must recognise the potential societal impact of a vastly reduced farming industry, particularly in emerging markets where millions of people are employed in the sector. 2015’s Paris Agreement on climate change referenced a ‘just transition’ to a lower carbon world, recognising the shift would mean challenges for workers, communities and countries – and any move away from an industry that has dominated food production for thousands of years will clearly not be without its upheavals.

Despite this, businesses on the right side of this transition are worthy of investigation whereas those following traditional agriculture models could face serious destruction of value – and as often happens with our themes, markets are underestimating the potential speed and scope of this change.

While there are hurdles to overcome, the direction of travel on livestock, meat and dairy looks as clear today as it is on fossil fuels – and we will continue to invest in companies exposed to such structural trends shaping the economy of the future.


Martyn Jones is co-manager at Liontrust Sustainable Future UK Growth Fund

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