• Meat & Dairy Results Sour COP26 Ambitions on Methane and Deforestation



    New data from $45 trillion-backed FAIRR Initiative is the market’s only comprehensive sustainability assessment of large meat, fish and dairy producers.

    • COP26 deal to cut methane: But only 18% of global meat and dairy producers track even partial methane emissions.
    • COP26 deal to end deforestation: Even meat giants with a zero-deforestation pledge, such as McDonalds suppliers JBS and Marfrig, do not have full visibility of the third-party suppliers that are responsible for up to 90% of deforestation from sourcing cattle.
    • Three Norwegian aquaculture firms (Mowi, Greig, Lerøy) among top 5 ranked companies. Maple Leaf (Canada), Marfrig (Brazil) and Fonterra (New Zealand) among top-ranked meat and dairy firms. Nine firms investing in sustainable feed.
    • “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… yet failures from methane to manure management underline the growing sense in the market that cows are the new coal.Jeremy Coller, Chair of $45 trillion FAIRR investor network.

    TORONTO–(BUSINESS WIRE)–Extensive new data published today by the award-winning Coller FAIRR Protein Producer Index shows that despite pockets of leadership and innovation the animal agriculture sector is unprepared for the decade of transition on climate change and risks looking “outdated and unattractive”. The Index assesses the firms that supply household names such as McDonalds, KFC and Carrefour.

    The Index, now in its fourth year, assesses 60 publicly-listed animal protein producers worth a combined $363 billion (49 primarily produce meat and dairy, 11 aquaculture), against ten environmental, social and governance (ESG)-related factors including GHG emissions, deforestation, antibiotic usage and investment in alternative proteins. The results are available free to investors to help them integrate ESG data and assess company performance.

    Key findings include:

    • Methane: 0nly 18% (9/49) of livestock producers measure even partial methane emissions, undermining the sector’s ability to play its part in a global deal for 30% methane reductions struck at COP26 this month. Annual methane emissions from global cattle and livestock, make up 44% of global anthropogenic methane emissions and would require a forest covering around three quarters of South America to sequester. New Zealand, Ireland and the State of California have all set methane reduction targets covering livestock of at least 10% by 2030.
    • Deforestation: 42 of 45 (93%) meat and dairy firms including San Miguel (Philippines) and Minerva (Brazil) which source soy (for animal feed) from high-risk deforestation areas such as the Cerrado (Brazil), do not have a policy to mitigate deforestation in all sourcing areas. Monitoring of indirect suppliers (those who supply a firm’s direct suppliers) of cattle also remains a problem and misses up to 90% of deforestation. Even companies with a zero-deforestation pledge, such as JBS, Marfrig and Minerva, do not have full visibility of these indirect suppliers. Marfrig report that 53% of its Amazon cattle purchases came from indirect suppliers.
    • Leadership emerging: Three Norwegian aquaculture firms are represented in the Top 5 Index companies: Mowi ASA (1st), Grieg Seafood ASA (2nd) and Lerøy Seafood Group ASA (4th), with the highest-ranking meat and dairy firms being Maple Leaf (Canada), Marfrig (Brazil) and Fonterra (New Zealand). Full league table in notes to editor.
    • Feed Innovation: With feed prices reaching an eight-year high, driven partly by extreme weather, Nine meat, fish and dairy firms are investing in sustainable feed ingredients or production to de-risk their supply chains. E.g. Cranswick (UK) is trialling feed based on insect protein, peas and beans and JBS (Brazil) have partnered with Netherlands-based DSM to implement a feed additive to reduce methane emissions from digestion in cows.
    • Alternative protein innovation: Nearly half (28/60) of Index companies now have exposure to alternative proteins, compared to just a quarter (15) in 2019. Sevenmeat companies report investments in cultured meat. E.g. Thai Union have formed partnerships with cultured meat start up Aleph Farms and cultured seafood start up BlueNalu Inc; and this month JBS entered the space with a £100m investment in the acquisition of a Spanish cultivated meat firm and a cultivated meat R&D centre.

    Jeremy Coller, Chair and Founder of FAIRR, and Chief Investment Officer of Coller Capital said:

    “The post-COP26 era leaves large parts of the meat and dairy supply chain looking outdated and unattractive. Failures from methane to manure management underline the growing sense in the market that cows are the new coal.

    “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 given the COP26 commitment to reduce methane 30% globally by 2030.

    “From class actions to carbon taxes and regulation, investors are using FAIRR’s data to quantify increasing risks in animal agriculture. Carbon taxes for example are expected to cost beef companies up to 55% of current average EBITDA by 2050.

    “We are at an inflection point and if we are to avoid the meat and dairy sector becoming a stranded asset, we must harness the leadership emerging in parts of the industry and transform the way our food, particularly protein, is produced.”

    Eugenie Mathieu, Senior Analyst, Aviva investors said:

    “The science is clear that to avoid runaway climate change high-emitting sectors such as agriculture must transform themselves in the next decade. Yet FAIRR’s latest research shows how far the food sector has to go. 86% of the world biggest meat and dairy suppliers are still failing to set meaningful reductions targets for emissions, which is enormously unhelpful given that extreme weather events are increasingly hurting the bottom lines of these companies. Investors can play their part by demanding that the animal protein producers they invest in step up to the plate and make change happen more quickly.”

    Other findings from the 60-company assessment include:

    Climate

    • Climate change arrives: At least 7 companies have reported climate-related financial impacts. Tyson Foods’ (US) operating income decreased $410 million year-on-year in the first nine months of 2021 in large part from severe weather disruptions. BRF (Brazil) estimates changes in precipitation rates will result in annual losses of up to R$800 million. FAIRR calculates a predicted carbon tax (of $53/tonne) by 2050 would increase costs for beef companies up to 55% of current average EBITDA.
    • Climate Risk: 86% of major meat and dairy suppliers fail to declare or set meaningful reduction targets for all greenhouse gas emissions including those in their supply chain (Scope 3). Among companies that report even partial emissions, one in four (26%) saw emissions rise this year.
    • Improved targets and processes: 13% have set science-based emissions reduction targets, up from just 7% in 2020. 20% have set net zero targets, up from 7% in 2020. 18% have completed a climate-related scenario analysis, up from 3% last year.
    • Methane regulation emerges: New Zealand, Ireland and the State of California have all set methane reduction targets covering livestock of at least 10% by 2030, and more jurisdictions may follow after the COP26 deal. New Zealand dairy producer Fonterra state that, given its environmental restrictions, the country has now reached ‘peak milk’, while Ireland is expected to have to cut its national cattle herd by 20% to meet its target.

    Other ESG issues

    • Manure: The volume of faeces produced by the world’s 70 billion farm animalsis equivalent to double that created by the entire human population – releasing methane and threatening biodiversity and human health. Despite this, 88% (43/49) have no or limited disclosure and commitments on manure pollution. Using methodologies developed by academics, FAIRR has calculated that the animals processed by Tyson Foods (US) (~2 billion annually) alone produce as much excrement as the entire US population.
    • Water use: 94% companies are categorised as ‘high risk’, down from 96% in 2020. Of the companies that have water consumption or withdrawal targets, only seven (14%) disclose having set targets at the facility level. They include JBS, Marfrig, Maple Leaf and Tyson.
    • Waste & Pollution: 100% companies rank ‘high risk’ – the same as last year. In the US, slaughterhouses discharge the highest phosphorus levels and second highest nitrogen levels of all industrial categories, often into water. Yet none of the major meat producers that operate in the US market have set quality or volume targets on wastewater from their processing facilities.
    • Antibiotics: Companies are improving antibiotics use with 62% of companies ranked ‘high risk’, down from 75% in 2020.
    • Animal welfare:63% are categorised as ‘high risk’, improving from 68% in 2020.
    • Food safety:43% are categorised as ‘high risk’, making it one of best performing risk factors. 100% of companies headquartered in Europe and Russia have operations certified by a Global Food Safety Initiative-recognised scheme, compared to only 55% in Asia.
    • Working conditions: Only 37% rank as ‘high risk’ versus 57% in 2020, suggesting this has been an area of positive focus in the wake of the pandemic.
    • Governance: 52% of companies are categorised as ‘high risk’, compared to 63% in 2020.

    Sanjeev Krishnan, Chief Investment Officer of S2G Ventures, said:

    “The consumer, capital markets and innovation are transforming the food system – positioning it to increase food security, meet global emissions targets and feed a growing population. A healthier and sustainability food system is the under-recognized solution to address all these critical global challenges. It’s encouraging to see such major investments in research, development and innovation from some of the world’s largest protein producers. Their leadership has the potential to change the image of protein as we know it. This year has seen the biggest move from the protein producers in to the alternative meat space, capped by JBS entering the cultivated meat space with a £100m investment

    Vemund Olsen, Senior analyst at Storebrand said:

    “We are starting to see some parts of the animal protein industry rising to their sustainability challenges. Aquaculture companies such as the three Norwegian firms in the top 5 of FAIRR’s ranking are starting to act on issues such as deforestation and feed, and there are more meat and dairy companies setting net zero targets and innovating in alternative proteins. But the sector must not rest on these laurels. With feed prices reaching an eight-year high, the sector is greatly exposed to extreme weather impacts and other ESG risk. Innovation and transparency is urgent across the animal protein industry to foster growth and meet the challenges ahead.

    Arthur van Mansvelt, Senior engagement specialist, Achmea Investment Management said:

    “Commitments at COP26 were the easy bit. Now comes the hard job of aligning sectors such as agriculture with a net zero future. It’s encouraging that 20% of the sector has now set net zero targets, with more undertaking climate scenario analyses. But it’s clear that these key suppliers to global food brands need to set more comprehensive policies on emission reporting and deforestation. The sector, especially meat and dairy firms, must also improve how it measures and mitigates its impacts on biodiversity at a time when biodiversity is declining at a faster rate than any point in history. Investors should engage with the food and agriculture sector on these issues as a priority.”

    Bruno Poulin, CEO of Ossiam said:

    “As biodiversity continues to be threatened by ‘business as usual’, it is of great concern that 86% (43/50) of meat and dairy companies covered by the Protein Producer Index have no or limited disclosure and commitments on manure pollution – a devastating driver of biodiversity loss. As the largest listed protein producers, these companies have supply chains that span the globe – and the impacts from poor waste management policies are being felt far and wide. It is important that all livestock companies follow the few leaders which have emerged in the sector, and set effective policies to tackle this issue.”

    Patrick Peura, ESG Engagement Manager, Allianz SE said:

    “FAIRR data gives investors a highly valuable basis on which to engage animal agriculture companies. The Index helps identify positive examples of leadership – such as investment in feed innovation, effective target-setting and climate risk scenario analysis – which the rest of the sector can learn from.

    “Importantly, the Index also sheds light on the gaps that still need to be addressed in the sector – such as the failure of a majority of companies to adequately monitor, report and manage their GHGs like methane from animal waste. It is critical that investors continue to engage with firms constructively to support solutions in the sector, and the index helps us do that.”

    Alex Howson, Senior Investment Manager, Pictet Asset Management said:

    “Our food system is facing unprecedented challenges. We need a food system that provides a nutritious and sustainable diet for our growing population and acts within planetary boundaries, so it is crucial we take steps now to protect and preserve the land we farm. As investors, FAIRR’s research helps us to engage with protein producers on key issues such as deforestation, emissions, animal welfare and water use. We also leverage FAIRR’s data and Protein Producer index in our investment process, helping us to allocate capital towards companies that will protect and improve our food production system.”

    Notes to editor

    • For more information or to speak with FAIRR or investor spokespeople contact:

    Full league table:

    Rank

    Company

    Market Cap ($bn)

    Country

    Final score

    Risk category

    1

    Mowi ASA

    11.49

    Norway

    81%

    Low risk

    2

    Grieg Seafood ASA

    1.11

    Norway

    75%

    Low risk

    3

    Maple Leaf Foods Inc

    2.72

    Canada

    69%

    Low risk

    4

    Lerøy Seafood Group ASA

    4.20

    Norway

    68%

    Low risk

    5

    Marfrig Global Foods SA

    1.93

    Brazil

    65%

    Low risk

    6

    Fonterra Co-operative Group Ltd

    4.09

    New Zealand

    64%

    Low risk

    7

    Thai Union Group PCL

    2.16

    Thailand

    63%

    Low risk

    8

    Multi X

    0.53

    Chile

    60%

    Medium risk

    9

    BRF SA

    3.43

    Brazil

    59%

    Medium risk

    10

    Tyson Foods Inc

    21.65

    USA

    59%

    Medium risk

    11

    JBS S.A.

    11.89

    Brazil

    57%

    Medium risk

    12

    Charoen Pokphand Foods PCL

    6.96

    Thailand

    53%

    Medium risk

    13

    Bakkafrost P/F

    4.21

    Faroe Islands

    52%

    Medium risk

    14

    Tassal Group Ltd

    0.57

    Australia

    51%

    Medium risk

    15

    Cranswick PLC

    2.64

    UK

    50%

    Medium risk

    16

    Hormel Foods Corp

    26.78

    USA

    49%

    Medium risk

    17

    Salmones Camanchaca SA

    0.42

    Chile

    48%

    Medium risk

    18

    SalMar ASA

    6.63

    Norway

    47%

    Medium risk

    19

    Scandi Standard AB

    0.55

    Sweden

    44%

    Medium risk

    20

    WH Group Ltd

    12.36

    China

    42%

    Medium risk

    21

    Emmi AG

    5.51

    Switzerland

    42%

    Medium risk

    22

    Bell Food Group AG

    1.69

    Switzerland

    41%

    Medium risk

    23

    NH Foods Ltd

    4.38

    Japan

    41%

    Medium risk

    24

    LDC SA

    2.03

    France

    38%

    Medium risk

    25

    Minerva SA

    1.03

    Brazil

    37%

    Medium risk

    26

    Grupo Nutresa S.A.

    3.22

    Colombia

    37%

    Medium risk

    27

    China Mengniu Dairy Co Ltd

    23.83

    China

    35%

    Medium risk

    28

    Inghams Group Ltd

    1.13

    Australia

    35%

    Medium risk

    29

    Sanderson Farms Inc

    2.85

    USA

    32%

    Medium risk

    30

    Vietnam Dairy Products JSC

    9.84

    Vietnam

    31%

    Medium risk

    31

    MHP SE

    0.64

    Ukraine

    30%

    High risk

    32

    Inner Mongolia Yili Industrial Group Co Ltd

    40.32

    China

    28%

    High risk

    33

    Great Wall Enterprise Co Ltd

    1.41

    Taiwan

    27%

    High risk

    34

    Cal-Maine Foods Inc

    1.71

    USA

    26%

    High risk

    35

    San Miguel Food and Beverage Inc

    8.25

    Philippines

    26%

    High risk

    36

    Nippon Suisan Kaisha Ltd

    1.50

    Japan

    25%

    High risk

    37

    RCL Foods Ltd/South Africa

    0.58

    South Africa

    21%

    High risk

    38

    Almarai Co JSC

    14.63

    Saudi Arabia

    19%

    High risk

    39

    Beijing Sanyuan Foods Co Ltd

    1.14

    China

    19%

    High risk

    40

    GFPT PCL

    0.59

    Thailand

    18%

    High risk

    41

    Australian Agricultural Co Ltd

    0.55

    Australia

    17%

    High risk

    42

    Maruha Nichiro Corporation

    1.25

    Japan

    16%

    High risk

    43

    Japfa Ltd

    1.42

    Singapore

    16%

    High risk

    44

    Muyuan Foodstuff Co Ltd

    43.28

    China

    16%

    High risk

    45

    Thaifoods Group PCL

    0.91

    Thailand

    15%

    High risk

    46

    COFCO Joycome Foods Ltd

    1.35

    China

    15%

    High risk

    47

    Astral Foods Ltd

    0.31

    South Africa

    14%

    High risk

    48

    QL Resources Berhad

    3.56

    Malaysia

    14%

    High risk

    49

    Wens Foodstuff Group Co., Ltd.

    17.74

    China

    12%

    High risk

    50

    Industrias Bachoco SAB de CV

    2.25

    Mexico

    11%

    High risk

    51

    China Modern Dairy Holdings Ltd

    1.55

    China

    11%

    High risk

    52

    Prima Meat Packers Ltd

    1.59

    Japan

    10%

    High risk

    53

    Cherkizovo Group PJSC

    1.09

    Russia

    10%

    High risk

    54

    New Hope Liuhe Co Ltd

    15.46

    China

    10%

    High risk

    55

    Seaboard Corporation

    3.52

    USA

    10%

    High risk

    56

    Grupo Bafar SAB de CV

    0.61

    Mexico

    7%

    High risk

    57

    Venky’s India Ltd

    0.30

    India

    6%

    High risk

    58

    Beijing Shunxin Agriculture Co Ltd

    8.24

    China

    5%

    High risk

    59

    Fortune Ng Fung Food Hebei Co Ltd

    0.71

    China

    2%

    High risk

    60

    Fujian Sunner Development Co Ltd

    5.04

    China

    2%

    High risk

    • Access to all data is available upon request via the digital Coller FAIRR Index: www.fairr.org/index
    • Methodology: All companies are given an overall ranking of ‘low’, ‘medium’, ‘high’ risk’ or ‘best practice’, based on their scores against ten sustainability factors. These are: Governance, Greenhouse Gas Emissions; Deforestation and Biodiversity; Water Scarcity and use; Waste and Pollution; Antibiotics; Animal Welfare; Working Conditions, Food Safety, and Sustainable Proteins. More details of the methodology are available online. All statistics are based on latest publicly available data collected before October 2021. Market capitalization figures are based on companies’ latest fiscal year.

    About FAIRR

    The FAIRR Initiative is a collaborative investor network, founded by Jeremy Coller, with a membership of $45 trillion assets under management. FAIRR works with institutional investors to define the material ESG issues linked to intensive livestock and fish farming systems and provide them with the tools necessary to integrate this information into their asset stewardship and investment decisions. This includes the Coller FAIRR Index, the world’s first comprehensive assessment of the largest global animal protein companies on environmental, social and governance issues. Visit www.fairr.org and follow @FAIRRInitiative.

    Contacts

    Angela Pinzon, Kaiser & Partners
    t: 647-295-0517 | e: [email protected]

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