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ESG Investors Urge Livestock Industry to Diversify, Innovate to Dodge ‘Apollo 13 Moment’

An ESG investors’ network is urging the animal agriculture industry, which is facing a cascade of climate-related risks, to align itself with climate goals and diversify into sustainable protein production to help avoid an exodus of financing and the most dire consequences of climate change.

“Investors will be concerned that the global animal agriculture sector could face an Apollo 13 moment—a near disaster that will take urgent innovation to survive—as the low-carbon transition forces investors to shift capital,” said Maria Lettini, executive director of the FAIRR Initiative, a network of investors that aims to raise awareness of the environmental, social, and governance risks and opportunities associated with intensive livestock production.

The Intergovernmental Panel on Climate Change’s (IPCC) recent stark predictions for climate change’s impacts on the future of agriculture are already occurring, FAIRR says. According to the network’s research, drought and changes in precipitation have already caused crop yield losses estimated at 25% between 1961 and 2006. Livestock production is under direct stress from high temperatures causing animal mortality, as well as indirect stress through its effects on grasslands, species distribution, and disease.

“Livestock is projected to face additional heat stress throughout the world, growing more severe as the world gets warmer,” FAIRR says, citing the IPCC report.

“In fact, the USA, UK, and West Africa are projected to lose up to 17% of milk production by the end of the century,” the group says. “The report also highlights that at just 2°C of warming, livestock numbers will decrease by 7 to 10% by 2050, resulting in US$10 to 13 billion in economic losses.” 

Up to 34% of existing crop and livestock production areas could be unsuitable by the end of the century, when taking into account the higher-end projections for temperature increase, FAIRR adds. The regions most at risk are the world’s top livestock producing countries like Brazil, China, and India.

Impacts on animal feeds and inputs will most severely affect production systems that depend on natural grasslands for food. Climate change is already having a negative impact on grasslands in North America, South Asia, and Mongolia.

The physical risks of climate change could also raise the prospect of stranded assets for investors, and “as climate change affects profitability, it will become critical to analyse specific impacts in greater detail,” says FAIRR. The Coller FAIRR Climate Risk Tool finds that companies with the highest risks to profitability are located in Africa, Asia, and South America.

In response to the direct threats to agricultural production, policy-makers, businesses, and consumers are pressing the industry to make fundamental reforms to keep emissions in line with climate goals.

But “despite these growing risks, recent findings from the Coller FAIRR Protein Producer Index found just seven out of 60 companies analyzed have reported climate-related financial impacts,” reports Business Green. However, the impacts that are being disclosed are significant, such as Tyson Foods’ loss of $410 million from climate-related impacts in the first nine months of 2021.

FAIRR also acknowledges that some adaptations like specialized breeding are being put to use, and mixed crop-livestock systems could support adaptation by increasing diversity.

The group also recommends diversification into sustainable protein production as another way to reduce climate-related risk. It cites the IPCC’s embrace of plant-based alternatives and cellular agriculture as options for transforming the food system while delivering multiple co-benefits for animal welfare, land sparing, and lowered risk from animal-to-human disease transmission, pesticide use, and reliance on antibiotics.