UPDATE: ‘Depressing’ report reveals meat & dairy company failings on methane, deforestation

UPDATED December 2, 21:19 GMT, to add comments from asset management firms Aviva Investors and Robeco.

While several major protein-producing companies have made significant advances when it comes to tackling climate change, the animal agriculture sector as a whole remains “unprepared” for the task, looking “outdated and unattractive,” according to new analysis from activist investor group FAIRR.

Starkly, FAIRR’s new research reveals that just 18% of global meat and dairy producers track methane emissions. FAIRR also discovered that several meat giants, such as McDonalds suppliers JBS and Marfrig, do not monitor the third-party suppliers that are responsible for up to 90% of deforestation from rearing cattle, despite having a zero-deforestation pledge. Multi-national promises to reduce methane emissions by 30% and end deforestation by 2030 were two of the highest-profile outcomes of the COP26 summit in October.

FAIRR’s Protein Producer Index, which is now in its fourth iteration, rates 60 publicly-listed companies involved in animal-derived protein production — including 49 companies mainly producing meat and dairy from land animals, and 11 primarily focused on aquaculture.

These companies are rated by FAIRR on their environmental, social and governance (ESG) performance against metrics such as greenhouse gas emissions, deforestation, antibiotic usage, and investment in alternative proteins.

Asset management firms like Aviva Investors and Robeco are members of the FAIRR network and can access the research behind the index as well as best practice tools and networking to help with their own ESG investing endeavours.

Several large asset management firms like Aviva Investors and Robeco are signatories to FAIRR’s work and use the index and the research behind it to inform their investment decisions and ESG endeavours.

“These results are depressing,” Eugenie Mathieu, senior analyst at Aviva, told AFN. 

Unlikely to divest on the back of the insights, instead they use the information as part of their engagement process with such companies in an effort to help them improve their ESG credentials.

“Our general policy as an investor is to engage with companies rather than divest,” said Mathieu. As investors “who take ESG seriously” she said that Aviva has a responsibility to put pressure on companies to make changes for the better. “If we divest, that pressure will be lost,” she added. However, if after two to three years of engagement there’s insufficient improvement, they might divest.

Robeco’s Peter Van der Werf, senior manager of engagement, said that FAIRR’s analysis is invaluable for the industry after years of “patchy data” about the fish and meat supply chain, which he started working on in 2015.

While both investors said progress had been slow in significant ways, they were optimistic about the growth in overall awareness of the climate footprint of the industry, particularly among consumers. Increasing industry ventures into the protein alternatives industry, both plant-based and cell-based, were also positive steps, they added.

93% are ‘high risk’

Almost two-thirds of companies included in FAIRR’s index (60%) are yet to set Scope 1 and 2 emission targets, according to the analysis; while 93% were ranked as as ‘high risk’ for their potential contributions to waste and pollution.

Overall, 50% of ranked companies were considered ‘high risk’ due to “chronic underreporting and poor management of major risk themes.”

Zooming in on Asia, 93% of protein-producing companies were rated ‘high risk’ with regards to their antibiotic usage.

Animal health companies can do more to fight antibiotic resistance, says FAIRR – read more here

Enteric methane from livestock accounts for about 44% of total anthropogenic methane emissions; but only nine out of the 49 major protein-producing companies that feature in FAIRR’s analysis keep track of their methane output, according to the study.

Meanwhile, few analysed companies scored well on deforestation. The main driver behind this is soybean production, with 42 of 45 — or 93% — of featured meat and dairy firms sourcing soy for animal feed from areas considered to be ‘high risk’ for deforestation. Most of these companies do not have policies to mitigate deforestation in their supply chains or full visibility of their own indirect suppliers, with Marfrig reporting that 53% of its cattle purchases in the Amazon basin come from such indirect suppliers.

On the plus side, more major protein-producing companies than ever (47% of those in the FAIRR index) have “exposure” — by investment or other means — to supposedly environmentally-friendly alt-proteins; with 28 of the 60 featured involved in the growing meat analogs industry compared to just 15 in 2019. Of those, seven have invested in cultivated meat companies; deals include JBS’s recent $100 million acquisition of BioTech Foods.

Here are the top five companies in FAIRR’s ranking:

And the bottom five:

“Failures from methane to manure management underline the growing sense in the market that cows are the new coal,”
Jeremy Coller, chair and founder of FAIRR and chief investment officer at Coller Capital said in a statement.

“As the largest driver of both methane from human activity and deforestation, the ambitions set at COP26 handed a big slice of responsibility to the food and agriculture sector, We cannot deliver the COP26 commitments without addressing the protein supply chain. More political and regulatory focus on the food industry is now inevitable, but currently only 20% of meat and dairy giants measure even some part of their methane emissions. This should be a red flag to markets.”