Investor coalition engagement results in more plant-based alternatives to meat

On the 07/27/20 at 12:54PM


Adrien Paredes-Vanheule

Global food retailers and manufacturers are beginning to seize opportunities in the alternative protein market, according to a report from the 88-strong Fairr Initiative.

The Fairr Investor Network, a coalition of now 88 investors managing $13trn in assets, has been leading engagement since 2016 on sustainability issues with 25 giant food retailers and manufacturers. And the group has started to reap the fruits of this dialogue as the Fairr reported on Monday that two in five global food players have established dedicated teams to develop and sell plant-based alternatives to meat and dairy. It includes among others Kroger, Coles, Marks & Spencer, Sainsbury’s and Tesco. At Nestlé, 10% of the research and development's unit solely focus on the development of plant-based products. The report found out that seven out of the 15 retailers already sell or intend to sell plant-based meat alternatives on the meat aisle.

Jeremy Coller, founder of the Fairr Initiative and chief investment officer at Coller Capital, stated: “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.” 

At the top of the Fairr report's rankings sit British supermarket chain Tesco and Anglo-Dutch firm Unilever as the companies, considered 'pioneers', have been able to shift food portfolios to more sustainable protein sources, demonstrate board-level support for a climate-aligned protein transition and complete a climate ‘scenario analysis’ on their commodity supply chains. In the 'proactive' category dwell Nestlé, Mark & Spencer, Casino and Carrefour among others. Standing in the last four ranks are US companies Walmart, Kraft Heinz, Amazon and Costco, the last three being viewed as reactive and the first one as active.

It is estimated alternative proteins' market gathered a net $1.1bn of venture capital investment in the first half of 2020, more than doubling 2019’s total investment ($534m) while the market is expected to reach $17.9bn by 2025. At BMO Global Asset Management, a member of the Fairr network, responsible investment chief Nina Roth believes the current sustainable shift “brings sizable opportunities for companies that implement strategic goals for managing a robust protein transition. investors will be watching closely to identify the leaders and laggards in this sustainable food transformation.”

Her counterpart at Amundi, Caroline Le Meaux, head of ESG research, voting and engagement, pinpointed that the switch to more sustainable diets has become a 'powerful tool' for trimming greenhouse gas emissions and improving global health. “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,” she noted.

The Covid-19 outbreak in addition to the African swine fever crisis have put pressure on global food players left with an increasing consumer demand for plant-based products to address. China-based plant-based pork brand OmniFoods has recorded all-time high growth across Asian markets while other players such as Impossible Foods and Nestlé, eye the region.

Julia Kochetygova, head of EMEA stewardship at Northern Trust Asset Management, said: “The Covid-19 crisis has exposed the fragility of supply chains, and illuminates the need for innovative and alternative proteins to be explored as a potentially more resilient solution to the issue of soaring global protein demand (...) With the US plant-based sales up 200% from April 2019 to April 2020, investors are interested to see supermarkets and food retailers diversify their protein sources to fortify their supply chains in a resource-constrained, post-COVID landscape.”

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