The US$13trn investor coalition engaged with 25 food retailers and manufacturers over a period of four years to examine their approaches to sustainable proteins.
Tesco and Unilever were praised by investors for their commitment to shift food portfolios to more sustainable protein sources. FAIRR said this demonstrates board-level support for a climate-aligned protein transition, moving away from animal proteins towards plant-based and new protein sources. Both companies attracted plaudits for completing climate ‘scenario analysis’ on their commodity supply chains.
Tesco's own brand line-up includes the popular Wicked Kitchen rage and the company extended its reach in the plant-based space last year with the rollout of affordable family favourites under the Plant Chef line.
Plant-based products already make up around a third of Unilever’s portfolio, according to information from the company. Innovation and product development have been leveraged to expand its portfolio of dairy-free and vegan options, such as Hellmann’s Vegan, Magnum Vegan and Vegetarian Butcher products.
Unilever is investing further in product development and it recently opened a €85m Foods Innovation Centre at Wageningen University & Research Campus, which will ‘help formulate the next generation of meat and dairy alternatives’.
“We’re delighted to be recognised as the leading food manufacturer in FAIRR’s report on companies shifting to more sustainable protein sources. We are very supportive of the work FAIRR is doing to advocate for increased investment in this area,” Hanneke Faber, Unilever’s President of Foods & Refreshment, said.
“We have a responsibility and an opportunity to help transition towards a food system that is more resilient and more sustainable. Our ambition is to make it easier for people to eat more plant-based foods that are good for us, good for the planet and, of course, delicious at the same time.”
Big brands ‘scaling-up and skilling-up’ in plant-based
Unilever is not the only food manufacturer stepping up investment in plant-based. FAIRR’s research found 40% of leading food firms now have dedicated teams for plant-based products.
Kroger, Coles, Marks & Spencer, Sainsbury’s and Tesco all have dedicated human resources focused on plant-based product development while half of the engaged manufacturers (Conagra Brands, Kerry Group, Nestlé, Saputo, Unilever) said they have dedicated individuals or teams focused on alternative protein development, such as new product development or new protein sources.
FAIRR noted Nestlé is investing US$100m to build a plant-based centre in China, with 10% of all Nestlé’s R&D employees now dedicated solely to the development of plant-based products. Meanwhile, seven of the 15 retailers surveyed now sell, or plan to sell, plant-based meat alternatives ‘on the meat aisle’, reflecting the shift to mainstream.
“The company data published today is hard evidence that big food brands are vying for their slice of the plant-based pie. They are drastically scaling-up and skilling-up their capacity to research and develop plant-based alternatives to meat and dairy. Tangible goals for a protein transition are being put in place,” Jeremy Coller, Founder of FAIRR and Chief Investment Officer at Coller Capital, noted.
Investment vehicles and venture capitalists are also stepping up their activity in the alt protein space, the research found, highlighting new research that shows over US$1.1bn of venture investment has flowed into alternative proteins in the first half of 2020, more than double last year’s total investment of US$534m.
COVID-19 makes 2020 a ‘watershed year’ for plant protein
Forecasts from Meticulous Research suggest the alternative protein market is expected to grow to US$17.9bn by 2025.
FAIRR observed that amidst public concern over the link between meat production and the ongoing COVID-19 and African Swine Fever crises, retailers and manufacturers are facing a ‘surge’ in demand for plant-based products.
“The post-COVID landscape has made 2020 a watershed year for the sustainable protein market: the sector has attracted double the investment of last year in just six months,” Coller noted.
The data comes from FAIRR's new online Sustainable Proteins Hub for investors, and ‘Appetite for Disruption: A Second Serving’ report, launched today.
Since it began in 2016, with 40 investors managing US$1.25trn of assets, FAIRR’s Sustainable Proteins Engagement has grown ten-fold to include 88 investors managing over US$13trn in assets in 2020. The coalition of investors, includes Amundi, Northern Trust and BMO General Asset Management. It aims to encourage global food companies to diversify their protein sources to drive growth and reduce risk in a 'post-COVID, resource-constrained world'.
"Changing consumer attitudes, food tech innovation, environmental and health risks – also for workers - are set to reshape the protein production industry as we know it,” Nina Roth, Director of Responsible Investment at BMO Global Asset Management said.
“This brings sizable opportunities for companies that implement strategic goals for managing a robust protein transition. BMO has led discussions with leading food retailers on how they're preparing for this shift, and investors will be watching closely to identify the leaders and laggards in this sustainable food transformation."
As well as capitalising on the opportunity, Caroline le Meaux, Head of ESG Research, Voting & Engagement at Amundi, stressed transitioning to more sustainable proteins is also about managing climate risk.
Investors also welcomed a 57% increase from 2019 to 2020 in food companies with Scope 3 emissions targets including emissions from animal agriculture.
Despite agriculture accounting for around 30% of global greenhouse gas emissions along with forestry and other land-use, corporate targets have historically failed to address the emissions footprints of animal agriculture and its supply chains.
"The switch to more sustainable diets has become a powerful tool for reducing GHG emissions and improving global health, as confirmed by the IPCC. The animal protein supply chain is highly vulnerable to the material impacts of a warmer world. Therefore, investors are increasingly seeing diversification into alternative proteins as an opportunity to mitigate potentially disastrous climate risks whilst building resilience for the widespread market disruption ahead,” le Meaux said.
“Amundi has engaged leading European retailers on how they plan to reduce their dependence on increasingly volatile animal protein sources and seize the opportunities presented by more sustainable proteins in the long-term."