FAIRR and GFI join forces to provide investors and companies with “common language” to assess ESG credentials of fast-growing sector.
The FAIRR Initiative and the Good Food Institute (GFI) have launched two new reporting frameworks for companies in the alternative protein sector that reveal their climate, biodiversity, nutrition and other ESG impacts. The frameworks provide investors with the disclosures and metrics needed to better understand the ESG risks and opportunities of investing in alternative protein production.
Traditional animal farming methods are heavily resource intensive and make a significant contribution to global greenhouse gas emissions. An estimated 23% of total anthropogenic gas emissions derive from agriculture forestry and other land use. That figure is increasing as the demand for animal products continues to grow and further competes for land.
“We have a large amount of deforestation in the Amazon linked to cattle ranching and we also have soy, which is the second largest driver of tropical deforestation,” said Abby Herd, ESG Analyst at FAIRR. “Between 70-75% of all soy production becomes livestock feeds.”
Other risks from established farming methods come from industrial agriculture, “mostly manure, but also antibiotic pollution,” said Herd. “We have investigated the poor and unsafe working conditions within the animal farming sector. There’s a significant absence of fair wages and, in some cases, human rights.”
FAIRR and GFI contend that many plant-based meat products have a fifth to less than a tenth of the environmental impact of meat-based equivalents.
The frameworks give alternative protein producers and retailers the ability to accurately report on the sustainability impact of their businesses and provide the depth of data required by ESG investors to draw comparisons between animal and alternative proteins businesses.
There are two frameworks, drawn up in by the US$68 trillion-backed FAIRR Initiative investor network and GFI, a non-profit organisation focused on innovation and adoption of alternative protein, with input from a range of investors, companies and NGOs, including Unilever, EAT Just Inc., Newton Investment Management, PIMCO, Blue Horizon and the WWF-UK as well as ESG and life cycle assessment (LCA) experts.
The authors of the frameworks will work with alternative protein brands that want to use them to report on ESG factors such as carbon emissions, land, water and nutrition impacts.
Alternative proteins, including plant-based, fermentation-enabled, and cultivated meat, seafood, eggs and dairy, are expected to provide a pathway to decarbonising food production while meeting the global demand for protein.
Although a relatively new sector, investor interest in alternative meat, seafood, eggs and dairy companies has been growing rapidly, driven by a greater awareness of the intensifying environmental threats from the way protein is currently produced.
Over the past few years, investment in alternative proteins has increased by an average five-year growth rate of 91% through 2021 (according to GFI analysis of PitchBook data) and sales are estimated to rise by up to US$1.1 trillion by 2040.
The new frameworks provide investors, governments, and consumers with a route to receiving accurate information from each alternative protein business. Until the frameworks were launched there were no comprehensive standards for companies manufacturing and selling alternative proteins to assess and disclose the kind of rich ESG data that investors and companies, and consumers need to make informed decisions.
“You cannot manage what you cannot measure,” said Jeremy Coller, Chair and Founder of FAIRR, and Chief Investment Officer of Coller Capital. “These frameworks provide investors and companies with a common language and set of standards to measure and disclose how they are managing their ESG impacts and addressing climate goals.”
The new frameworks are also expected to catalyse further investment by equipping financial institutions with a toolkit of disclosures and metrics to gain transparent and actionable insights into a company’s activities.
“As alternative protein start-ups grow and mature, and eventually become the food industry giants of tomorrow, using this new specialised framework will help to ensure that they are ready for the ESG disclosures that are now demanded of all large companies across private and public markets,” said Rosie Wardle, Co-founder and Partner at Synthesis Capital.
“We will be integrating the framework into our existing ESG policies and processes to help us further understand company performance in a more detailed way and monitor impact over time.”