Financial disclosure of meat
April 2020: Most meat companies have limited disclosure of climate-related risks and show limited progress in developing climate risk mitigation or adaptation strategies. A new analysis tool for the meat industry aims to support the financial disclosure of climate risks and opportunities for meat companies in a 2oC warming scenario.
Information
The majority of companies producing meat have limited disclosure of climate-related risks according to global asset managers. Recently, consumption and production of meat has experienced increased scrutiny and has been characterised as a sizeable contributor to climate change. According to the IPCC, agriculture, land use and food manufacturing account for 25-30% of total GHG emissions and accelerate deforestation. It coincides with increasing pressure for companies to calculate their climate change exposure risks and develop mitigation strategies and to disclose this in line with standards such promoted by the Task Force on Climate-related Financial Disclosures (TCFD). FAIRR has released a new analysis tool for the meat industry based on TCFD standards which supports the analysis of climate-related risks and opportunities for meat companies in a 2oC warming scenario.
Implications and opportunities
Meat producing companies are experiencing heightened pressure to address climate risk. Failure to do so may result in investment funds divesting from carbon-intensive food and meat companies akin to trends in the fossil fuel industry. In addition, mitigation risks could include evolving consumer attitudes and shifts towards plant-based diets which could outpace the industry’s capacity to adapt, increased regulation in livestock rearing, environmental-linked taxes, stricter emissions policies and increased cost of capital. Other adaption risks could include increased costs and operational damage due to water shortages, environmental degradation and effects of rising temperatures such as heat induced mortality of livestock, or increased animal feed costs due to poor crop yields. FAIRR recommends a reduction of climate risk exposure via reducing reliance on carbon intensive proteins or feed (beef and poultry) and an increased market shares in alternative proteins, such as plant-based proteins and resilient feed crops.
Limitations
The analysis tool is a theoretical framework and further research will be required to test the tool’s practical applicability. All results should be seen within the framework’s methodological and data limitations.
Sources
FAIRR (2020). New financial modelling on climate shows billions of dollars at risk in the meat sector. Retrieved from: https://www.fairr.org/article/new-financial-modelling-on-climate-shows-billions-of-dollars-at-risk-in-the-meat-sector/
Terazono, E., (2020). Meat companies must do more over climate risks, says investors. Retrieved from https://www.ft.com/content/101c7334-63aa-11ea-a6cd-df28cc3c6a68