Green Finance is Sending the Meat Sector to the Slaughterhouse

Intensive farming has long been the most significant contributor to global warming. The meat sector produces almost half of the world’s methane gas, causes one fifth of all greenhouse emissions, requires 20,000 litres of water for each kilogram of meat produced, and is responsible for 80% of tropical deforestation. Historically, these negative externalities have been ignored and left as an issue for future generations to face.

However, in the past 30 years, methane emissions have risen by two-thirds (Meyer 2020). To put it simply, if meat production rises in line with population growth, by 2050 intensive farming will single-handedly cause flooding, droughts, storms, the spread of tropical disease, incurable antibiotic resistant bacteria and the loss of many lives (Lyman 2016). Unfortunately, given the nature of the sector, it is safe to assume that the meat industry does not concern itself over moral philosophy - which is where green finance comes in.

The Green Finance Revolution

The global transition towards sustainability means the meat sector will face pressure from governments to follow new green regulations, as well as from investors who increasingly see value in ESG investments. In a financial model published by FAIRR, the financial implications of climate change on the meat sector were affirmed. The model found that the profitability of the meat sector is at risk in 7 different ways and estimates that alternative proteins will account for 60% or more of the market in the future (Mehmet 2020). It now pays to be green. Investors fear returns in the meat sector will dissipate, either due to the huge sums of money needed for research and construction of cattle rearing tactics which follow green regulations, or due to huge fines implemented for environmental crimes. Research analyst Robert Wilson explains the climate ‘megatrend’ has significant effects on all sectors, meaning any company which fails to transition to a low-carbon economy will negatively impact investor returns. Considering the meat sector’s overwhelming carbon footprint, it will face detrimental disruption (Foote 2020).

The Costs of Climate Change

In addition, climate change itself will significantly affect the production costs of the meat sector, potentially to the point of extinction. It is predicted that by 2050 the world climate will be 2°C warmer. FAIRR’s ‘Climate Risk Tool’ found the meat sector will face more livestock mortality from heat stress, higher costs of feed due to poor crop yields, and increased cost of electricity due to carbon pricing, estimated to cost the sector billions of pounds (Mehmet 2020). A change to production of meat alternatives at this point seems to be not only a necessity, but a natural evolution. Alternative protein production, such as plant, microbial and insect-based proteins and meat-substitutes require very little energy and land, making it extremely profitable. If the meat sector ignores this, it will inevitably be outcompeted by rapid growth of alternative protein companies.

The failure to plan ahead may lead investors to do this analysis for themselves and cash out of the sector (Mehmet 2020). Remaining ignorant to its biggest threat means the meat sector is a helping hand in its own downfall. The meat and dairy industries have long been subsidised by governments, so whether the government is truly committed to a green future and removes all subsidies from the sectors, or whether they continue to fund the meat sector despite its carbon footprint, may determine how long the sector survives. Regardless, as consumers wake up to the environmental crisis and unethicality of consuming meat, coupled with investors who would much rather invest in ESG ventures, it is only a matter of time until the meat sector is sent to the slaughterhouse. For companies to survive, there will need to be instant action taken to either convert to meat-alternative production or to develop technology which makes cattle farming sustainable and ESG-friendly.

Can the Meat Sector be Saved?

The most alarming factor of the green finance revolution is that the meat sector appears to be blissfully unaware. Only 2 out of 43 of the world’s largest meat companies have disclosed a scenario analysis which is climate-related, compared to almost 25% of companies publishing the same information in the oil, gas and utilities sectors.

By Sofia Akuamoah

References

Foote N 2020, Meat sector must adapt to climate change or face ruin, new analysis warns, Euractiv, viewed 26 June 2020, <https://www.euractiv.com/section/agriculture-food/news/meat-sector-must-adapt-to-climate-change-or-face-ruin-new-analysis-warns/>

Lyman H 2016, The Effects of Intensive Animal Agriculture on the Environment, Act Sustainably, viewed 8 July 2020, <https://www.actsustainably.com/blog/2016/8/8/the-effects-of-intensive-animal-agriculture-on-the-environment>

Mehmet S 2020, Climate financial model shows billions of dollars at risk in meat sector, New Food Magazine, viewed 26 June 2020, <https://www.newfoodmagazine.com/news/107317/climate-financial-model-shows-billions-of-dollars-at-risk-in-meat-sector/>

Meyer G 2020, Methane from manure offers green fuel revenue for US farmers, The Financial Times, viewed 27 June 2020, <https://www.ft.com/content/773b8934-51a7-11ea-a1ef-da1721a0541e>