PLANT-BASED PROFITS: INVESTMENT RISKS & OPPORTUNITIES in SUSTAINABLE FOOD SYSTEMS FAIRR Briefing, February 2018

PLANT-BASED PROFITS: INVESTMENT RISKS & OPPORTUNITIES IN SUSTAINABLE FOOD SYSTEMS FAIRR Briefing, February 2018

www.fairr.org @FAIRRinitiative DRIVERS

CONTENTS FOREWORD

Foreword 3 At Nestlé, we recognize that for a business like ours to be successful, INVESTORS we must take a long-term view. As a global food company, we have the Introduction 4 responsibility and the opportunity to shape the sustainable production and Investment Drivers 8 consumption of food to preserve our planet for future generations – which Market opportunities in alternative proteins 10 is why we are evolving our portfolio of products based on sustainable protein sources. Innovation in food technology 16 Diversifying our protein sources helps us respond to growing consumer and ESG impacts 22 stakeholder concerns on the impacts of increased animal protein production COMPANIES “This report shows Advocacy and regulation 26 Duncan Pollard, and consumption on both health and the environment. It also helps us that alternative How investors are responding 28 AVP, Stakeholders capitalize on enormous opportunities in plant-based foods: in 2017, Nielsen proteins are rapidly Engagement in found that over the course of 12 months, sales of plant-based alternatives How companies are responding 38 going mainstream. Sustainability, to animal proteins rose 8.1%, in contrast to declining food sales in the From meatpackers FAIRR sustainable protein engagement 44 Nestlé same category.1 to supermarket About the companies in the engagement 46 Across the food industry, we are seeing the early days of a sector-wide stackers the global response to the challenge of increasing exposure to alternative proteins. For Engagement process 48 food sector is rapidly food companies and their investors, no roadmap exists to help us navigate ENGAGEMENT taking notice of Findings 52 the complexity associated with protein diversification. A key first step will be plant-based Corporate actions on protein diversification 58 to evolve a shared understanding of what corporate best practice in this area alternatives to animal looks like across four strands: strategy, innovation, engagement and metrics. protein products, and References 61 One of Nestlé’s strategic priorities is to build out its portfolio of vegetarian that is driving 8% and flexitarian choices. In 2017, we acquired Sweet Earth, a plant-based annual growth in the foods manufacturer, which gave us immediate entry into the plant-based alternative proteins foods segment in the US. This complements our existing European focused market.” brand Garden Gourmet. We are dedicating a significant part of our R&D Jeremy Coller budget to the topic of plant proteins and have already acted to reformulate Founder of the FAIRR existing product ranges to substitute animal-derived ingredients where Initiative and CIO possible. This has included reformulations in our health science, of Coller Capital beverage and food businesses. DRIVERS INVESTORS COMPANIES See page 8 See page 28 See page 38 On metrics, Nestlé is currently in the early stages of defining a tracking method to monitor development of our sales in plant protein. We already track the origin of our protein sources, and we are actively looking to increase the share of plant-based proteins. The development of the protein supply chain is an issue with the potential to radically reshape the supermarket shelf of the future. We very much welcome the support of those investors who want to act today to stay ahead of the curve in the economy of tomorrow. We look forward to continuing to work with FAIRR’s investor network 1Source: Nielsen, 2017. ‘Plant-based proteins are gaining dollar share among North Americans.’ Accessed 24 January 2018. http://www.nielsen.com/us/en/insights/news/2017/plant-based- to ensure we support sustainable consumption and act as responsible proteins-are-gaining-dollar-share-among-north-americans.html stewards of the world’s natural resources for future generations. 3 DRIVERS

INTRODUCTION INVESTORS One of the greatest challenges facing the world today is to ensure that the growing population has access to adequate, sustainable and nutritious food. COMPANIES The global food system is under increasing pressure in trying IN 2018, THE AVERAGE AMERICAN to meet this challenge. This pressure is particularly evident in livestock WILL CONSUME ALMOST 10 OUNCES production, given the sector’s substantial external impacts, its interaction OF MEAT AND POULTRY EACH DAY – TWICE THE RECOMMENDED AMOUNT with sustainability megatrends, and a growing global middle class that is IN USDA’S NUTRITIONAL GUIDELINES. demanding more meat. In the last 15 years, global Global meat consumption consumption of beef, veal,

HOW WE DEFINE SUSTAINABLE PROTEINS ENGAGEMENT poultry and pork is We define sustainable proteins as protein-rich food sources that are: 370,000 estimated to have risen by 30%. The latest projections • consistent with nutritional requirements by the Organisation for • produced to high environmental and ethical standards Economic Co-operation and 330,000 • diversified in their sourcing Development (OECD) and the Food and Agriculture The most sustainable form of proteins do not involve large-scale Organization of the United livestock or fish production, primarily because of the difficulties

Million tonnes 290,000 Nations (FAO) show demand of producing animal protein sources that are carbon-neutral, will continue to grow, high-welfare, environmentally responsible and efficient. primarily due to rising For this reason, our report and investor engagement incomes and population in 250,000 has a specific focus on alternative proteins, which include developing countries. In 2006 2011 2016e 2021e 2026e plant-based foods and protein sources, fermented proteins developed economies like and cultured meat. We believe these sources provide among the US, demand is also Consumption is projected to increase + 13% in the next ten years the most promising solutions for feeding the world sustainably Source: OECD-FAO Agricultureal Outlook 2017-2026 Statistics expected to continue to and nutritiously. increase, albeit at a slower pace. Overall, global meat consumption is projected to rise by over 13% in the next ten years (OECD/FAO 2017). Meeting this demand will continue to exacerbate the industry’s environmental, health and social impacts as producers scale up and intensify their operations.

5 INTRODUCTION DRIVERS

RISKS AND OPPORTUNITIES IN PROTEIN PRODUCTION For these reasons, investor interest in this issue is expanding. We see four Conventional (i.e. industrial) livestock production systems have enjoyed key drivers that will shift the food system from its dependence on animal uninterrupted growth over the last few decades. While this trend is proteins towards alternative protein sources: INVESTORS expected to continue in the short term, resource constraints may dampen • growing market opportunity to meet demand for plant-based foods; expansion in the long term. Furthermore, the sector is increasingly ripe • accelerated innovation in food technology; for disruption. The issue of protein diversification is therefore key to managing the risks of climate-affected supply chains and for seizing • increasing awareness of ESG impacts linked to intensive opportunities for market growth. livestock production; Livestock production presents reputation and market risks for companies • and advocacy and regulation to moderate growth that are over-reliant on animal proteins to drive revenue growth. The in the animal protein sector.

sector is heavily dependent on unpriced externalities associated with COMPANIES the inputs to, and resultant outputs from, this type of system, which have Main drivers of protein diversification enabled its dramatic expansion. These include deforestation, unregulated antibiotic use, poor animal welfare practices, and low scrutiny of air and water pollution on surrounding communities. These externalities and impacts are incompatible with the Sustainable Development Goals (SDGs). Market Innovation Thus it is increasingly likely that governments could use some form of Opportunity Potential taxation to combat meat’s negative contributions to climate change

and health epidemics such as obesity and cancer. ENGAGEMENT Alongside the growing risk profile of livestock production, there are also opportunities to be seized from the burgeoning plant-based foods market and, more broadly, alternative proteins, which offer a more sustainable food production model. The growing trend of millennials adopting flexitarian and meat-free diets signals a change in purchasing habits that ESG Advocacy and is a significant shift from that of earlier generations. Companies across Impacts Regulation the food value chain, from producers to retailers, are already investing in these opportunities. In the short to medium term, advances in technology and innovation will open entirely new areas of investment opportunity that will likely transform the protein sector in a fundamental way.

This shift is highlighted by the growing investor support for FAIRR’s Protein diversification has the potential to transform a food engagement with 16 global food companies to diversify protein sources. company’s core business and value proposition: its growth, We launched our engagement in September 2016, supported by 40 profitability, risk exposure and ability to compete and innovate. investors with $1.25 trillion in combined assets under management (AUM). At the time of writing, AUM support has almost doubled with 57 investors now managing some $2.4 trillion (learn more about our engagement from page 44 onwards).

7 DRIVERS INVESTORS COMPANIES ENGAGEMENT 9

food trends in 2017 and 2018 by in 2017 and 2018 trends food commentators industry numerous Forbes,including Rabobank, Insights Market Innova Mintel, and MarketWatch. In recent years, the plant-based years, In recent has seen strong market foods and proteins Alternative growth. key named were diets flexitarian

DRIVERS Peter van der Werf van Peter Senior Engagement at Robeco Specialist food producers we engage with. We regard the shift from pure processing companies and protein as crucial for the meat protein-of-choice suppliers based Collaborating with FAIRR and protein development since 2016. play animal protein suppliers to on both animal and vegetable other investors has strongly opportunities in sustainable supported our work in this space.”

IN ALTERNATIVE PROTEINS IN ALTERNATIVE MARKET OPPORTUNITIES OPPORTUNITIES MARKET “Robeco has been engaging on DRIVERS INVESTORS COMPANIES ENGAGEMENT 11

increased by 140% and 440% respectively in Southeast Asia alone. The alone. Asia in Southeast respectively by 140% and 440% increased in Europe and North America. Asia, currently lagging behind with lagging behind Asia, currently and North America. in Europe the acquisition of plant-based protein producer Quorn Foods by Philippine Quorn Foods producer protein the acquisition of plant-based concentrated is currently market that the meat alternatives the fact to food giant Monde Nissin. Following the deal, Monde Nissin pointed pointed the deal, Monde Nissin Following Nissin. giant Monde food Between 2012 and 2016, new vegetarian and vegan product launches product and vegan vegetarian 2016, new 2012 and Between a market share of just 12% to 15%, offers significant growth significant 15%, offers 12% to of just share a market opportunities for investors. opportunities for Asia–Pacific region is poised to register the highest CAGR of 6.3% between CAGR highest the register to is poised region Asia–Pacific 2017 and 2025 (Persistence Market Research 2017). A useful illustration is 2017). A useful illustration Research Market 2017 and 2025 (Persistence ASIA

in five for Germans aged between 16 and 24. A decade ago, only 1% ago, only 16 and 24. A decade aged between for Germans in five In Germany, one in ten consumers buy meat alternatives, rising to one to rising alternatives, meat buy consumers ten in one Germany, In (Mintel 2015). (Mintel red meat intake, while 24% say they are increasing the amount increasing are 24% say they while meat intake, red of vegetarian processed foods in their diet (Mintel 2017). in their diet (Mintel foods processed of vegetarian of Germans considered themselves vegetarians; this has risen to 7% this has risen to vegetarians; themselves of Germans considered Around half of Italian consumers say they are lowering their lowering are they say consumers half of Italian Around it could make up a third of the market by 2050 (Lux Research 2015). 2050 (Lux Research by of the market up a third make it could in the EU and flat consumption for traditional meat products, Rabobank’s Rabobank’s meat products, for traditional consumption in the EU and flat Intelligence 2017). Industry estimates project that the sector globally will globally that the sector project estimates 2017). Industry Intelligence total EU protein demand growth in the next five years (Rabobank 2017). years five in the next demand growth EU protein total fall in sales of 0.2% for all foods sold across American grocery stores. stores. grocery American sold across all foods 0.2% for of in sales fall US retail sales of plant-based foods that directly replace animal products animal products replace that directly of plant-based foods sales US retail EUROPE US Global Strategist –Animal Protein at Rabobank. –Animal Protein Strategist Global Europe is the largest market for meat substitutes, accounting for 39% of for accounting substitutes, meat for market is the largest Europe Plant-based cheese alternatives were the fastest-growing category, category, the fastest-growing were Plant-based cheese alternatives Based Foods Association and Nielsen 2017). This compared with a and Nielsen 2017). This compared Association Based Foods reaching $5.2 billion by 2020 (MarketsandMarkets n.d.). Longer term, n.d.). Longer by 2020 (MarketsandMarkets $5.2 billion reaching and 2021 (Research and Markets 2017), with the plant-based meat market with the plant-based meat market 2017), and Markets and 2021 (Research average 8% a year since 2010. Currently, growth is about twice the rate the rate twice is about growth 2010. Currently, since 8% a year average of alternative proteins will continue over the next five years, at least… Alternativea material proteins share have andof the animal capture potential protein more to capturemarketdemand share growth in thein the US EU, and Canada.” of processed meat, with annual sales of about $2 billion (Bloomberg of about $2 billion (Bloomberg with annual sales meat, of processed 2017 of 8.29% between (CAGR) rate annual growth at a compound expand global sales (Allied Market Research 2016). With 8% annual growth rates rates 2016). With 8% annual growth Research (Allied Market sales global enjoying 18% growth. enjoying grew 8.1% in the 12 months to August 2017 (Good Food Institute, Plant Institute, 2017 (Good Food August 8.1% in the 12 months to grew Annual global sales of plant-based meat alternatives have grown on grown have meat alternatives of plant-based sales Annual global 2017 report suggested that alternative proteins could represent a third of a third represent could proteins that alternative suggested 2017 report Justin Sherrard Sherrard Justin • • “The strong and persistent drivers supporting the current growth DRIVERS DRIVERS DRIVERS

ALTERNATIVE PROTEIN DEMAND IS DRIVEN MILLENIALS EAT MEAT ALTERNATIVES BY HEALTH CONCERNS AND MILLENNIALS EVERY DAY, WHILE 50% EAT MEAT The expanding reach of social media, the availability of information on ALTERNATIVES A FEW TIMES A WEEK food provenance, and concerns around transparency in the food industry INVESTORS globally means that issues around health, sustainability, traceability and animal welfare have more impact on consumer purchasing decisions. The meat-free market sits at a lucrative intersection of all of these changing social dynamics. Consumers are increasingly reducing meat intake to improve their health. This is largely driven by a growing awareness of a causal link between

high meat consumption and some non-communicable diseases (NCDs), COMPANIES supported by a mounting body of scientific evidence. This in turn is prompting health campaigners, professionals and regulators to deliver a consistent message around the benefits of eating less meat. We expect this trend to continue (see Advocacy and regulation section on page 26). To illustrate, a 2017 study published in the British Medical Journal linked high levels of red meat consumption to a 26% increase risk of contracting nine NCDs, including cancer, type 2 diabetes, strokes and Alzheimer’s (Etemadi et al. 2017). The World Health Organization, in a high-profile ENGAGEMENT announcement, has also classified red and processed meat as carcinogenic. In contrast, consumers see health benefits in plant-based proteins, Why people are eating more plant-based foods and associate these products with positive health effects and superior nutritional value. A 2016 University of Oxford study found that a ‘healthy’

diet (i.e. one containing less meat) could prevent 5.1 million deaths a year 83% 85% globally by 2050. Meat-free protein products are no longer limited to the relatively narrow consumer group that identifies as vegetarian or vegan. 62% For example, 39% of Americans are actively trying to incorporate more 56% 55% plant-based foods into their diets, and millennials are driving this shift: 51% 30% eat meat alternatives every day, while 50% eat meat alternatives a few times a week (Nielsen 2017). 24% 23% 20% 21% 17% 14%

Improve Overall Weight Want To Eat Clean* Due To Health To Save Money Concerns About Health And Management Concerns/ Environmental Nutrition Diagnosis Protection

US CANADA

*Incorporate more foods that are unprocessed or minimally processed Source: Nielsen, Homespun Panel Protein survey, April 2017 (U.S.) Source: Nielsen Panelviews survey, March 2017 (Canada)

13 DRIVERS INVESTORS COMPANIES ENGAGEMENT 15 2015 Milk 2012 mption Non-milk alternatives nsu o 2008 Volume (rebased) 2004 c non-dairy milk Milk and e: Euromonitor, Financial Times c 2001 Sour 600 500 400 300 200 100

Other high-profile companies such Other high-profile “focus on diversification both within and beyond dairy… page 41). as Danone are also actively addressing the shift (see case study, study, the shift (see case addressing also actively as Danone are this opportunity with Good Karma is a way for us to build a platform hemp and pea milk, all of which offer health benefits such as high health benefits such as of which offer hemp and pea milk, all of almond, sales Europe, In Western content. omega-3 and protein to 2014. In years in the five and oat milks doubled rice coconut, ninefold, and in North America threefold rose they Australasia Euromonitor. to according 13% in the dropped of milk has consumption per capita Meanwhile, 4.1%. fallen have sales in Europe while years, five the past US over lower reported Dean Foods US dairy producer this backdrop, Against company of 2017. In mid-2017, the quarter fiscal for the third profits of US producer a leading in Good Karma foods, bought a stake said that as part of CEO Ralph Scozzafava Dean’s plant-based dairy. the company’s PLANT-BASED PRODUCTS OVERTAKE MILK OVERTAKE PRODUCTS PLANT-BASED up make now and almond milk, soy such as products, Plant-based animal-based dairy products while dairy market, 10% of the overall stagnated. have than doubled more dairy alternatives of plant-based sales Worldwide Euromonitor. to $21 billion, according 2009 and 2015 to between non-dairy milk, consume to reported are Americans 50% of Nearly and heart health over concerns to attributed with this trend loss. weight are Companies driving growth. is also variety product Increasing flax, such as barley, ingredients with experiment to starting for a larger plant-based portfolio.” DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 17

15 October 2017 1 November 2017 1 November 2 August 2017 The Wall The Wall Street Journal The Race to Find Meatless Protein Products Forbes Non-Dairy Meat, Fake Hungry Investorst Draw Wired the startups Meatless meat: ditching animals from meat

23 August 2017 2017 30 November 10 August 2017 7 December 2017 Bloomberg Bill Gates and Richard BackBranson Startup ‘Clean Meat’ That Grows The Economist is so tasty ‘meat’ Plant-based meat industry that Europe’s has to bite back Global Meat News Lab-grown meat firm in talks to license tech Reuters stake in Foods raises Tyson plant-based protein maker Meat Beyond

19 December 2017 2017 7 March 12 November 2017 12 November Fox Business Foods CEO: Tyson The Future of Food Might Be Meatless The Financial Times sets sights on Valley Silicon disrupting the meat industry Fortune and the Search Valley Silicon for Meatless Meat

INNOVATION IN INNOVATION TECHNOLOGY FOOD capturing are products protein in plant-based and alternative Advances as well news and mainstream consumers from deal of interest a great impacts. adverse as filling space in retailer aisles and on foodservice menus. foodservice on and aisles retailer in as filling space appearing and companies products new seeing innovative already are We technology may be on the cusp of a food we However, categories. across exponentially. trend this accelerate could that revolution such as 1960s, innovations of the 1930s to Revolution’ the ‘Green Since and antibiotics have breeding selective herbicides, synthetic fertilisers, with pace keep to production, in food increase a substantial enabled population growth. Animal agriculture however. limited, are in productivity These advances into energy feed 11% of gross around only – converts of meat – chicken that this realisation is growing (WRI 2016). There animal protein for shaking up. that is ripe a system inefficiency has created the current disrupt will fundamentally revolution technology food Today’s production in food growth incremental ending the historical market, advanced – from biotechnology and ingredients efficiencies. Novel – will produce meat products (or ‘clean’) cultured to plant-based proteins a step will create without the animal. This, in turn, foods protein-rich fewer far and with cost of the for a fraction change in efficiency is inherently inefficient, particularly in terms of feed conversion. According According conversion. feed of terms in inefficient, particularly is inherently efficient source the most (WRI), even Institute Resources the World to DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 19

Fermentation a brewing through and whey such as casein of animal proteins Creation the proteins produce to programmed are organisms yeast whereby process ALTERNATIVE PROTEIN TECHNOLOGIES PROTEIN ALTERNATIVE plant-based Advanced and nutrition texture taste, and optimised for plant sources from Derived (e.g. mung bean, lupin, algae) plant sources use of either novel through Cell culture medium culture in a nutrient-rich and fat) (muscle meat cells Growing of tissue pieces whole create to A RECIPE FOR VENTURE CAPITAL CAPITAL VENTURE FOR A RECIPE investment significant announced have meat companies Plant-based is Foods Impossible year. in the past investors capital venture from rounds its since financing in disclosed funded, with $258 million highly the most Meat 2017. Beyond million in August $75 recently most in 2013, founding Earlier stage date. to funding $50 million in disclosed with almost follows also technologies culture and cell fermentation on focused companies with Memphis Meats year, the past meaningful amounts over raised the 2017. Across Series A in August announcing their $17 million investment mainstream the technologies, protein spectrum of alternative to and Cargill Foods Tyson from is notable: these companies in interest and UBS. Temasek fund wealth sovereign Singaporean technology) methods (e.g. shear-cell processing novel or through DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 21

$17 million Series A 2017, in August announced and fund DFJ by VC lead and other by Cargill backed such as investors notable Branson Richard In January 2018 it was Foods that Tyson announced has also invested $258 million disclosed funding $258 million disclosed date to a $75 million was raise Latest in August announced note leading 2017, with Temasek include investors Other notable UBS and Horizons Ventures Almost $50 million disclosed disclosed $50 million Almost date funding to 5% stake took Foods Tyson in the Series F round through a further 2016, and announced in the Series G investment 2017. in December announced include investors Other notable Ventures 301 Inc and Google • • • • • • • • Investments

Production costs decreased decreased costs Production by 86% during 2017; aim to product launch commercial by 2021 Sells at $13.95 (same price Sells at $13.95 (same price as a beef burger) by reduced inputs cost Key 40% during 2017 in 2017 facility Opened new produce to Q3 with capacity meat 1m lb of minced at least per month (4 million burgers) Retails at $5.99 for 2 1/4lb for at $5.99 Retails pack burger funding round recent Most 2017) will (December enable a tripling of current a tripling of current enable capacity production • • • • • • Production and costing Production

clear benefits from an impacts perspective, makes an attractive case an attractive makes an impacts perspective, benefits from clear investment. for reduced costs to $3,800 per pound. The company has said that its protein said that its protein has pound. The company $3,800 per to costs reduced to compared land and 1% of the water 1% of the use just products by other echoed claims are Similar products. meat produced traditionally assessments initial life-cycle conducted have who in the space companies on their product. the alongside reduction, up and cost scale rapid for The potential

Currently focused on scale up; on scale focused Currently in product 2021 for targeting the market including Bareburger and including Bareburger chains Umami Burger Restaurants: as of beginning Restaurants: 500 in over 2018, available in the US, restaurants Retail: in 20,000 US stores, US stores, in 20,000 Retail: Safeway, including Kroger, Target Walmart, Fridays TGI Restaurants: and Veggie Grill and Veggie by Sysco carried service: Food • • • • • Commercial

Technology beef, pork, chicken and duck beef, pork, chicken Cell culture technology producing producing technology Cell culture Advanced plant-based protein plant-based protein Advanced protein, using wheat and potato a through plus heme created process fermentation Advanced plant-based protein plant-based protein Advanced with pea protein and using soy processing extrusion Memphis Meats Impossible Foods Impossible Company Meat Beyond GROWING FAST, SHRINKING COSTS SHRINKING FAST, GROWING stage early spectrum are protein the alternative across Many companies the speed Yet production. at low-level still or are commercialise, to and yet indicates reduction up and cost scale development, of their technological adoption may be on the horizon in and mainstream production that mass medium term. the short to has dramatically example, Memphis Meats, for meat company Cultured original meat its 12 months. While over of its product the cost reduced it had announced $18,000 per pound, by May 2017 the company cost DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 23 0.10 ) 2 0.10 0.10 0.78 ) ) 2 2 Soybean* 0.78 0.78 Soybean* Soybean* 0.18 0.18 0.18 Land use (100m 0.80 Land use (100m Land use (100m 0.80 0.80 0.93 Poultry 0.93 0.93 Poultry Poultry 1.16 1.16 1.16 ) ) ) 3 3 3 1.30 1.30 1.30 1.62 1.62 1.62 Pork Pork Pork Water (m Water (m Water (m per kg of protein per kg of protein per kg of protein 1.65 1.65 1.65 10.20 10.20 10.20 2.60 2.60 Lamb Lamb 2.60 Lamb The environmental impact of animal protein The environmental impact of animal protein 5.95 5.95 -eq (kg) -eq (kg) 2 2 The environmental impact of animal protein 5.95 -eq (kg) CO CO 2 Mekonnen & Hoekstra (2011 & 2012); Clark & Tilman (2017); USDA (2017) & 2012); Clark & Tilman (2017); USDA (2011 & Hoekstra Mekonnen

CO 10.20 10.20

10.20 4.01 4.01 Beef Beef 4.01 Beef livestock 2013; livestock 12.01 Sources: OECD-FAO Agricultural Outlook 2017–2026; FAO, Tackling climate change through change through climate Tackling 2017–2026; FAO, Outlook Agricultural OECD-FAO Sources: 12.01 POLLUTION FROM INTENSIVE LIVESTOCK FARMING IS EXTENSIVE,IS FARMING LIVESTOCK INTENSIVE FROM POLLUTION AND GROWING UNDER-REPORTED activity with a large resource-intensive is a production Livestock for and air pollution water land, cause It can footprint. environmental and ecosystems. communities surrounding of beef, dairy and lamb, producers global one of the largest Zealand, New in its water levels and microbe in nitrate has seen an alarming increase year, the US Last 2017). (The Economist effluents livestock from sources largest the announced Administration and Atmospheric National Oceanic soy extensive by caused in the Gulf of Mexico, recorded ‘dead zone’ ever shows Official data farms. livestock feed to in the area cultivation and corn agriculture, from come in Europe emissions that about 94% of ammonia or slurry spreading. storage such as manure activities from mainly of higher rates report frequently farms livestock to Communities next such as issues and respiratory pressure, in blood nausea, increases (The Guardian among children symptoms asthma wheezing and increased opposing the protests community to led have 2017a). These issues by facilities and processing farms industrial of new construction and Costco. such as Tyson companies *Soybean produced under sustainable conditions climate change through livestock 2013; Sources: OECD-FAO Agricultural Outlook 2017–2026; FAO, Tackling *Soybean produced under sustainable conditions Mekonnen & Hoekstra (2011 & 2012); Clark & Tilman (2017); USDA (2017) Sources: OECD-FAO Agricultural Outlook 2017–2026; FAO, Tackling climate change through livestock 2013; Mekonnen & Hoekstra (2011 & 2012); Clark & Tilman (2017); USDA (2017) *Soybean produced under sustainable conditions under sustainable produced *Soybean 12.01 *Soybean produced under sustainable conditions Sources: OECD-FAO Agricultural Outlook 2017–2026; FAO, Tackling climate change through livestock 2013; Mekonnen & Hoekstra (2011 & 2012); Clark & Tilman (2017); USDA (2017)

if global warming is not to exceed 2°C.” exceed warming is not to if global on Climate Panel the Intergovernmental from research recent More a are livestock from that methane emissions Change has reinforced that emissions published in 2017 show calculations Revised priority issue. Asrar (Wolf, estimated 11% higher than previously are cattle from 2017). & West problem; the tackle to will not be sufficient chain efficiencies alone Supply necessary. is equally foods plant-based more shifting diets towards change – dietary made one simple example, in the US, for If consumers could beans – the country from plant-based protein beef with substituting gas (GHG) emissions and 74% of its greenhouse 46% between achieve the animal agriculture 2020 (Harwatt et al 2017). This makes for targets and an important targets, Accord Climate Paris fruit of the low-hanging mitigation strategy. change climate of any effective facet It is becoming increasingly clear that tackling livestock emissions in food in food emissions livestock tackling that clear increasingly It is becoming towards strategy part of any investor be an essential should production published in 2014 studies peer-reviewed Two decarbonisation. portfolio and production livestock of increased the trend that unless calculated up the will take emissions cut, agricultural is substantially consumption as the primary budget by 2050, with livestock carbon world’s entire mean 2014). This would & Johansson (Hedenus, Wirsenius contributor would and transport, industry including energy, other sector, that every Chatham which is described as “impossible”. neutral, be carbon to have change is essential “Dietary concluded: on the subject report House’s ESG IMPACTS LINKED TO LINKED TO ESG IMPACTS PRODUCTION LIVESTOCK that challenges of multiple driver is the central farming livestock Intensive health, and people’s environment impact on the global a negative have These use and pollution. water to change and deforestation climate from in and upstream production both at the point of livestock occur challenges supply. the feed IS ESSENTIAL LIVESTOCK FROM DIVERSIFYING AWAY FOR PORTFOLIO DECARBONISATION PORTFOLIO FOR DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 25 Policy changes Policy oversight Weak governance Corporate disclosure Sustainability Governance issues Governance 4 • • • •

Antibiotic resistance diseases Infectious Social backlash Changing consumers conditions working Poor Human rights Shrinking labour pool Community health impacts jobs of rural Loss Land rights Social license operate to 11 Social issues • • • • • • • • • • • IS INCOMPATIBLE WITH MANY SDGS IS INCOMPATIBLE INTENSIVE LIVESTOCK PRODUCTION INTENSIVE LIVESTOCK Environmental issues Environmental Disease outbreaks Disease outbreaks GHG emissions and Deforestation loss biodiversity hazards Natural changeClimate pollution Water scarcity Water scarcity Resource animal welfare Poor Waste useHigh water Air pollution Soil degradation 13 • • • • • • • • • • • • •

REPRESENTS A SYSTEMIC RISK A SYSTEMIC REPRESENTS sector. antibiotic use in the livestock combat to sufficient will not be alone a 40 grams to worldwide meat intake that limiting found study A recent – could burger fast-food standard of one – the equivalent day per person by 66% animals in food of antimicrobials consumption global reduce ANTIMICROBIAL USE IN FOOD ANIMALS USE IN FOOD ANTIMICROBIAL of antibiotics consumer be the largest to continues industry The food resistance. rising antimicrobial to contributor – and is a leading globally systems, use in intensive-farming non-therapeutic of this is through Most in healthy animals. disease and infection prevent or to growth promote to antibiotics important of medically than 131,000 tonnes more Worldwide, that India, is estimated animals in 2013. By 2030 it in farm used were their antibiotics usage by 82%, increase China and the US will each et al., 2017). P. T. Boeckel, (Van 59% and 22% respectively regulations drug use has increased, scrutiny of such rampant While American the average et al., 2017). By comparison, P. T. Boeckel, (Van per day (Quartz 2018). burgers linked issues social and governance 28 environmental, has found FAIRR opposite. as illustrated production, livestock to is expected to consume 222 pounds of meat in 2018 – or about 2.4 consume to is expected DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 27

Consumer demand for clean labels and transparency clean Consumer demand for the understand better to demand among consumers is growing There or deemed unnatural products avoid and to of their food provenance by millennials, primarily driven eating trends, These ‘clean’ unhealthy. processed. and less sourced healthy, ethically that are foods favour consequence is a direct consumption plant-based food Increased a new attract to looking therefore are companies of this shift. Food sources food through by seeking growth of consumers, generation livestock. raised not dependent on intensively operate to as a licence Animal welfare demand, has and consumer by NGO campaigns driven Animal welfare, Illustrative years. in recent companies food for focus a core become fast announced In 2015, McDonald’s egg production. of this shift is cage-free be cage-free to egg supply North American its entire move a policy to 200 US-based companies then, over Since 2 billion eggs a year). (over now in the UK are All major retailers made similar commitments. have be so by to committed eggs, or have on their whole either cage-free In these countries. 2025, with similar momentum in many European to policies corporate robust further afield, and increasingly regions, their natural express animals to densities and allow stocking reduce be – and must issue operate’ to a ‘licence become have behaviours that prioritise companies Laggard system. any production into priced toexposed are welfare to consideration efficiency without production risks. operational and reputational

Worldwide, intensive farms account for 72% of poultry, in the last few decades. In the US alone, 50,000 facilities are classified as concentrated animal feeding operations. the environment and human health. and the environment impacts health and sustainability tackle to actions Government the around governments has prompted health burden growing Meat’s Countries meat consumption. reduce guidelines to dietary issue to world Netherlands and Kingdom, the the United such as France, in Europe, that recommend guidelines dietary new established have Sweden, of overhaul ever The first their meat and dairy intake. reduce people animal over Guide is emphasising plant-based foods Food Canada’s end of its the lower revised health ministry In 2016, China’s proteins. citizens to encourage to range meat consumption recommended their meat intake. moderate of diets on the the impact consider to also starting are Governments of the US revision recent During the most and environment. climate recommended panel expert team’s guidelines in 2015, the review dietary Denmark is indicators. environmental material the inclusion of key meat. In 2016, the on red a tax introduce to proposals considering But this growth has occurred in an era of low regulatory and public regulatory of low in an era has occurred But this growth livestock industrial from air emissions example, In the US, for scrutiny. Protection US Environmental under the regulated not are farms Air Act. Clean Agency’s an end, given to may be coming lax regulation of relatively This era on both production of livestock of the impacts awareness the growing parliament in the Swedish a motion tabled in Sweden Party Green ADVOCACY AND REGULATION ADVOCACY livestock concentrated efficiencies, production inherent their Due to protein. cheap animal to access global increased have operations farming have Investors worldwide. meat consumption This, in turn, has fueled sector. be a profitable to on what has proved capitalise rushed to on food. tax of a climate the introduction for calling The Guardian 2017b The Guardian 42% of egg and 55% of pork production.” “Intensive livestock farming has seen rapid expansion DRIVERS DRIVERS INVESTORS COMPANIES ENGAGEMENT 29 Protein diversification is increasingly is increasingly diversification Protein as investors institutional by recognised is it only ESG theme. Not a relevant social multiple to linked intrinsically but it also issues, and environmental their portfolio improve helps investors the Sustainable against performance Goals (SDGs).Development a way of increasing is diversification protein importantly, Most financial and operational and, ultimately, competitiveness company both the risks assessing are investors In many cases, resilience. of animal and consumption production the intensive with associated with the shift towards and the opportunities associated proteins, of protein. sources alternative

well as to identify food companies that proactively Sasja Beslik food industry, and it is important for long-term investors Head of Group Sustainable Finance, Nordea Finance, Sustainable Head of Group is robust enough to respond to a changing food supply invest in innovative solutions.” to know if the companies they invest in understand the us to be on top of the developments in this space as protein engagement offers practical guidance to related risks and opportunities. FAIRR’s sustainable companies to ensure they have a business strategy that chain. For us as investors, this engagement also helps “Sustainable protein is a fast-emerging issue for the

INVESTORS BASED PROFITS TO CAPITALISE ON PLANT- CAPITALISE TO INVESTORS ARE SEEKING ARE SEEKING INVESTORS DRIVERS INVESTORS COMPANIES ENGAGEMENT 31

Lisa Beauvilain for companies and investors. They are often higher growth food companies to encourage increased exposures to Head of Sustainability & ESG, Director, Impax Asset Management Impax Asset & ESG, Director, Head of Sustainability healthier food options for consumers. these opportunities and to help companies become better Impax is delighted to join FAIRR in engaging with global positioned for the transition to a more sustainable economy.” produce, aligning with emerging consumer demands. Sustainable proteinsmuch also lower have demands better risk on profiles,resources withsuch as water, land and feeds. They also have significantly reduced environmental externalities and pollution and in most cases, represent QUANTIFYING THE ESG IMPACTS ASSOCIATED ASSOCIATED QUANTIFYING THE ESG IMPACTS PRODUCTION WITH INTENSIVE LIVESTOCK assess to of methods and tools a wide range developing are Investors and the healthy and nutritious food to exposure individual company of investment identify sources to portfolios impact of food environmental and land water of climate, using a range Some are risk and opportunity. to companies of food footprint the environmental calculate to indicators screening using negative are Others decisions. their investment inform with high exposure companies example, for exclude, to criteria animal protein. to “Sustainable and plant-based proteins are true win-wins INVESTORS INVESTORS DRIVERS

The consolidated result of the three criteria is shown below for common food categories

NEC Organic veg. unpacked BNP PARIBAS AND SYCOMORE AM – HELPING INVESTORS +100% Organic pulses UNDERSTAND ESG RISKS AND OPPORTUNITIES The consolidated result of the three criteria is shown below for common food categories INVESTORS Organic veg. tinned (97%) In June 2017, BNP Paribas Securities Services partnered with Organic Sycomore Asset Management to accelerate the deployment of the NECmilk (53%) StandardOrganic veg. veg. tinned unpacked (64%) NEC, a new metric for assessing the environmental impact of the +100% Organic pulses economic activities of a company, a portfolio or an index. Developed Organic eggOrganic (33%) veg. tinned (97%) Average footprint Organic since 2015 by Sycomore AM, a specialist in responsible investment, milkOrganic (53%) fishStandard (24%) veg. tinned (64%) and in association with I Care & Consult and Quantis’s experts, the Milk (19%) Environmental Organic egg (33%) Performance NEC indicator assesses the contribution of a company’s overall Average footprint StandardOrganic egg fish(0%) (24%) EnvironmentalMulti-criteria activities towards energy and ecological transition, and measures the Milk (19%) COMPANIES Performance degree to which a business model is aligned with climate change Standard egg (0%) Multi-criteria goals. Organic chicken (-49%) Organic chicken (-49%) The NEC uses a scale ranging from -100%, for activities which are the Chicken (-82%) most harmful to natural capital, to +100%, for the most Chicken (-82%) Beef (-93%) Beef (-93%) environmentally-friendly solutions. In the case of the food industry, -100%-100% the NEC indicator classifies different types of food according to their respective environmental impact (climate, water, biodiversity) and the Positive NEC Negative NEC

Positive NEC Negative NEC ENGAGEMENT associated nutritional content (proteins, lipids, carbohydrates). Position of traditional food products based on their environmental performance (Quantis 2017 and Position of traditionalSycomore AM food calculations, products sources: based FODGES on their database environmental from ADEME, Global performance Footprint Network, (Quantis 2017 and FAOSTAT database). Sycomore AM calculations, sources: FODGES database from ADEME, Global Footprint Network, “The NEC marks a new stage in quantifying the environmental FAOSTAT database). impact of companies and the ongoing search for sustainable performance levers. It is proving to be a useful compass to “Based on Sycomore AM’s methodology, companies in the measure our environmental impact and to separate, within our food sector can be positioned based on the NEC ranging from portfolios, the winners and pioneers from the green-washers a company selling meat originating from intensive farming and the endangered economic species turning into stranded with a NEC close to -100% to a company positioned in assets. We are convinced this indicator will also be of great organic and plant-based food with a NEC close to +100%.” use to investors.” BNP Paribas Sycomore Asset Management

33 DRIVERS INVESTORS COMPANIES ENGAGEMENT 35

Nutrition

Over 50% Less than 25% proportion of total Health impacts as a environmental impact

Air pollution Health impact Water consumption Related to environmental pressures and environmental pressure criteria Climate change Relative health impact of food items based on nutrition Relative health impact of food items based on Cattle fruit, nuts which refers to products that have a positive nutritional impact, and; a positive that have products to which refers impact of products. This sustainability food exposure score provides provides score exposure food sustainability This impact of products. those with significant exposure to products that represent represent that to products exposure those with significant framework helps investors assess which companies are well are which companies assess helps investors framework Companies scoring the highest are those focused on fruits, those focused are the highest Companies scoring Companies are scored based on: (a) their healthy food exposure, exposure, based on: (a) their healthy food scored Companies are vegetables and organic food. food. and organic vegetables KEPLER CHEUVREUX – A COOKBOOKKEPLER CHEUVREUX PORTFOLIO A HEALTHIER FOR Kepler Cheuvreux points to the link between diseases and diet. the link between points to Cheuvreux Kepler per of 100 grams in meat consumption an increase example, For Kepler Cheuvreux, a financial services company, has introduced has introduced company, a financial services Cheuvreux, Kepler positioned to benefit from the transition to a healthier and the transition benefit from positioned to at the environmental which looks exposure, food (b) their green a proprietary ‘sustainable food and lifestyle’ framework. The framework. lifestyle’ and food ‘sustainable a proprietary the SDGs. to contribution a company’s assessing for a proxy an attractive long-term play for investors. play for long-term an attractive unhealthy food trends. Food and nutrition security is therefore and nutrition security is therefore Food trends. unhealthy food skewed towards nutrition – such as Acomo, Wessanen, Danone, Wessanen, nutrition – such as Acomo, towards skewed than with healthy lifestyles themes associated secular growth sustainable food system, and can help advance the SDGs. the help advance can and system, food sustainable day leads on average to a 10% higher risk of suffering a stroke. a stroke. a 10% higher risk of suffering to on average day leads The firm argues that food companies with a portfolio of products of products companies with a portfolio food that The firm argues benefit from to placed better – are and Bonduelle Produce Total Cultivation of vegetables, Source: Keplar Cheuvreux (Julie Reynald’s report ‘Natural Capital Compass. Bigger than carbon, Source: Keplar Cheuvreux (Julie Reynald’s report ‘Natural Capital a systemic view’) based on Springmann et al (2016).

Samuel Mary Senior Sustainability Research Analyst, Kepler Cheuvreux Kepler Analyst, Research Senior Sustainability low-calorie/low-carbon products help improve competitiveness, industry. We believe that there is increasing evidence that the environmental, health and ethical features of the livestock undergoing a profound transition in which environmental and and unhealthy products.” as food seen as healthy and more environmentally friendly sector constitute both an opportunity and a challenge for the social drivers are taking centre stage. Concerns associated with continues to win market share against more processed “In tandem with the energy sector, the food industry is also INVESTORS DRIVERS INVESTORS COMPANIES ENGAGEMENT 37

How would you rank yourself against your peers and competitors competitors and peers your against yourself rank you would How demand meet the increasing ability to company’s of your in terms diets? plant-based for (by stock portfolio own-brand current of your What percentage (i.e. is reliant measure) units or any other meaningful keeping fish, (poultry, livestock, on animal proteins as an ingredient) listed on a risk/impact assessment undertaken you dairy, eggs)? Have years? five the next over will this change mix? How this protein will annual revenues of your what percentage company, the Across align with plant-based diets (including that products from come the next will this change over How and proteins)? produce years? five R&D) (including development product of your What percentage meet that concepts on product focuses brands your budget across plant-based diets? to when it comes face you barriers the greatest What are diversification protein comprehensive a global, developing strategy? accelerate help you to useful will be most resources What external diversification protein comprehensive of a global, the development strategy? your a priority for offerings protein sustainable Is increasing by driven efforts If so, are years? five the next over company opportunities, market pressures, demand, competitive consumer or another factor? goals, environmental to adherence COMPANY ENGAGEMENT COMPANY collaborative joining through either companies with engaging are Investors or by incorporating FAIRR, by facilitated the one being like engagements, is to engagement. The purpose individual company into the issue on risks mitigating and/or capitalising are companies how understand long-term to ensure diversification protein to and opportunities linked shareholders. for creation value engagement for questions – key resource Investor

100

Sophie Deleuze in class’ approach to portfolio selection. Its socially responsible responsible Its socially selection. portfolio to approach in class’ both the business considers assessment (SRI) investment Senior SRI Analyst, Engagement Specialist, Senior SRI Analyst, investor groups to urge action on key issues such as the overuse such as the overuse issues action on key urge to groups investor livestock farming and animal abuse in sectors such as textiles such as textiles and animal abuse in sectors farming livestock billion in assets under management. It assesses both the financial both management. It assesses under billion in assets Candriam is a leading European asset manager with over € with over manager asset European a leading Candriam is Candriam scores both factory farming and businesses earning and businesses farming factory both Candriam scores levels, and takes part in collaborative engagements such CANDRIAM INVESTORS GROUP INVESTORS CANDRIAM Candriam Investors Group Candriam Investors most of their turnover from animal protein products negatively. negatively. products protein animal from of their turnover most model’s intrinsic sustainability and alignment with long-term and alignment with long-term intrinsic sustainability model’s towards products with a smaller environmental footprint.” and high levels of GHG emissions. Instead, Candriam rewards more more Candriam rewards Instead, of GHG emissions. and high levels to both in relation analysis, its SRI into practices animal welfare and sustainability performance of companies as part of a ‘best as part of a ‘best of companies performance and sustainability role to play in driving innovation behind more sustainable Candriam engages both at individual company andprotein; sector corporates in the food industry have indeed a key alternatives and a responsibility to nudge consumers and if there are controversies such as food safety scandals.as the FAIRR engagements on antibiotics and sustainable stakeholders’ interests. stakeholders’ incorporates It systematically farming. to approaches sustainable or pharmaceuticals. of antibiotics. sustainability issues both during initial investment review This is due to the industry’s significant impact on natural resources resources on natural impact significant the industry’s This is due to The firm speaks directly to company management, and has joinedcompany management, and to The firm speaks directly “Candriam engages with companies in the food industry on INVESTORS DRIVERS INVESTORS COMPANIES ENGAGEMENT 39

The food industry has undergone industry The food decade. in the last a revolution increasingly have Consumers label’ ‘clean towards gravitated sourced, ethically that are products The and healthy. sustainable is one market protein alternative beneficiaries of thisof the biggest leverage seek to shift, as companies build newto interest consumer their expand of growth, avenues de-risk their base and customer chains.supply

COMPANIES PROTEINS TO DRIVE GROWTH DRIVE TO PROTEINS EMBRACING ALTERNATIVE ALTERNATIVE EMBRACING THE FOOD INDUSTRY IS INDUSTRY FOOD THE DRIVERS INVESTORS COMPANIES ENGAGEMENT 41

Danone CEO, Emmanuel Faber, Financial Times 2017 Danone CEO, Emmanuel Faber, world through multi-channels and invest in sustainable based technology we can reach customers all around the nutritious solutions for tomorrow. We will redefine what dairy and plant-based mean.” HOW DANONE CAPTURED GROWTH THROUGHGROWTH CAPTURED DANONE HOW ACQUISITION PLANT-BASED the last by 61% over increased have sales In the US, non-dairy milk 15%. The trend by dropped have dairy milk sales while years, five example, for milk and other dairy products: organic to extends dairy-free 2017, while by 2.5% in dropped milk sales organic launches. cream ice up 4% of all new make now varieties its acquisition through a play on this growth In 2016, Danone made such of plant-based brands maker an established of WhiteWave, and 15 US food a top is now DanoneWave and Silk. as Alpro as to food bring “healthy is to whose mission company beverage has the acquisition, the company Since as possible”. many people in its US plant-based beverage investment a $60 million announced multi- It also launched an expansive, operations. manufacturing ice vegan acquired its newly promote to million dollar campaign So Delicious. brand, cream financial outcomes Early dairy and essential North America 2017, Danone’s In October from of $1.5 billion, up significantly sales plant-based unit posted Food to According before. the same period the year $738 million for company as a standalone sales in WhiteWave’s when factoring Dive, 4.7% rose company constituted newly the overall for sales year, last period. And in the 52 the year-ago to $7.61 billion compared to in the sales dessert Delicious frozen ending 29 April 2017, So weeks alternatives yogurt of its creamers, sales 15%, while US increased jumped by 21%. and almond milk beverages “By combining 100 years of dairy fermentation with plant-

their own-brand ranges, ranges, their own-brand one of the fastest-growing retailers. for categories ingredient makers such as makers ingredient their range ADM developing of plant-based ingredients that ranges and protein used by readily be can manufacturers; with collaboration Unilever’s and the Ingredion Givaudan, to of Wageningen University a plant-based steak develop cell’ ‘shear using innovative which transforms technology, a into proteins vegetable structure fibrous layered, the appearance matching of steak; and texture Kroger, including retailers, Joe’s, Trader Ralphs, Target, Foods, and Whole Wegmans meat multiple developing within products replacement Alternative protein product product protein Alternative include: developments • • • Across the food value chain, value the food Across to looking are companies through growth generate and product innovation in alternative development both within their legacy proteins, new and by creating brands offerings. product Product development and R&D: and development Product

Tyson Ventures’ 5% stake in stake 5% Ventures’ Tyson Meat, manufacturer Beyond of plant-based meat substitutes; and Tyson Cargill in investments meat start cultured up Memphis Meat; $100 million Kellogg’s fund, which led investment plant- by round fundraising a based smoothies maker and has Bright Greens Kuli, makers in Kuli invested products; of plant protein establishment Mills’ General and 301 Inc of incubator Meat in Beyond investment Hill, a plant-basedand Kite dairy company. High-profile venture venture High-profile include: investments • • • • Established players have players Established units capital launched venture and from, learn buy into, to up help scale eventually start-ups disruptive potentially alternative innovative offering products. protein Venture investments: Venture

of shelf-stable, plant-based of shelf-stable, $700 for milk products, million in 2017; of purchase Pinnacle’s $158 million for Gardein which 2014 (after in late double grew net sales with digits in 2016, even capacity); constrained major Canadian meat Leaf’s Maple processor acquisition of two recent plant-based brands: of manufacturer Lightlife, plant-based refrigerated a and Field Roast, foods; ‘meat’ of grain-based brand cheese products. and vegan a global manufacturer of manufacturer a global foods plant-based branded and beverages; deal to Soup’s Campbell’s Foods, maker buy Pacific Danone’s $12.5 billion Danone’s acquisition of WhiteWave, COMPANIES • • • Recent acquisitions include: Recent • Large food companies have companies food Large been acquiring plant-based protein and alternative their expand to companies proteins, of non-meat offering towards as part of a trend within consolidation greater industry. the food Acquisitions: Acquisitions: Companies are broadening their alternative protein portfolios using three key strategies: key using three portfolios protein alternative their broadening are Companies DRIVERS INVESTORS COMPANIES ENGAGEMENT 43

QUORN GROWTH ACCELERATES GLOBALLY ACCELERATES QUORN GROWTH as an mycoprotein using product protein alternative Quorn is an is in the UK, Quorn Foods in 1985 by Marlow Founded ingredient. meat most and replicates worldwide in 19 countries available now meals. pre-made to ingredients cuts – from by Equity Exponent Private from was bought In 2015, the company £550 million. Since for Monde Nissin manufacturer Philippine food 16% expansion: global Quorn has seen “unprecedented” the sale, The in 2018. expected in 2017, with the same growth year-on-year in the particularly many regions, across is seeing a surge company Nordics. and USA, Australia a confluence to puts this down Brennan CEO Kevin Quorn Foods more of younger, trend is a consistent there “Globally, of factors: on meat consumption. cut down to looking consumers educated the health and sustainability regarding by concerns This is driven by Quorn’s with meat. This is then enhanced associated issues of products wide choice innovation, strong store, in presence strong of audience at a broad targeted campaigns marketing and strategic a shift from seen have we years ten past In the meat reducers… being 75% today to as the majority of [our] consumers vegetarians meat reducers.” and markets current in both its key on growth With a focus continue set to looks story Asia, the Quorn growth into expanding in 2018 and further ahead. Monde Nissin CEO Henry Soesanto in 2018 and further ahead. Monde Nissin solution to Quorn as it was a great purchased “We commented: investment, With increased issues. major health and sustainability 15% growth maintain to and expect rates growth doubled have we decade.” the next for

In 2016, FAIRR launched a first- launched FAIRR In 2016, investor of-its-kind collaborative large encourage to engagement backing the investors the 57 institutional for case The financial capitalise to industry food the the need for engagement was clear: market. protein in the alternative opportunity growth on the extensive of the vast by a recognition support was also driven The investors’ sources protein animal with traditional of ESG risks associated array of the risks opportunities. The scale growth future that will constrain necessary, practices agriculture sustainable make this sector facing plant- to largely consumption patterns but not sufficient. Shifting diversification be part of the solution. Protein also based diets must food manufacturers and retailers and retailers manufacturers food sources. their protein diversify to food can impact a that factor material a financially is therefore – including its growth, proposition value business core company’s and innovate. compete to and ability exposure risk profitability, to companies global asking leading are investors these reasons, For evidence-based global, is that strategy diversification protein a develop future-proof help companies can Such a strategy and comprehensive. sustainability manage long-term chains, successfully their supply and growth. creation value and act as an engine for trends

ENGAGEMENT increasing pressure and shareholders food multinationals towards a more have a key role to play to spur leading Global Head of Responsible Investment, Investment, Head of Responsible Global shelf space, FAIRR’s engagement is sustainable protein supply chain. From risks and seize the market opportunities.” proving an important catalyst to help reformulation recipes to supermarket Abigail Herron Aviva Investors Aviva companies understand the long-term

DIVERSIFY PROTEIN SOURCES PROTEIN DIVERSIFY ENCOURAGE COMPANIES TO TO COMPANIES ENCOURAGE INVESTOR INFLUENCE TO TO INFLUENCE INVESTOR ENGAGEMENT: USING ENGAGEMENT: FAIRR SUSTAINABLE PROTEIN PROTEIN SUSTAINABLE FAIRR “The global food system is under DRIVERS INVESTORS COMPANIES ENGAGEMENT 47 $1.2 TRILLION GENERATED IN REVENUES BETWEEN 2016 AND 2017 3 1 ARE FOOD MANUFACTURERS ARE FOOD COMPANIES MARKET COMPANIES LEAST ONE OWN- AT BRAND ALTERNATIVE PRODUCT PROTEIN All

3 2 Zero HAVE COMPANIES REPORTED A METRIC MEASURES THAT MIX THEIR PROTEIN ARE RETAILERS 5 PARTICIPATE COMPANIES IN CROSS-SECTORAL ON COLLABORATIONS DIVERSIFICATION PROTEIN 43% HEADQUARTERED IN THE US 57% HEADQUARTERED IN UK EUROPE, INCLUDING 6 TARGETS HAVE COMPANIES REDUCE GHG EMISSIONS TO WITH THEIR ASSOCIATED CHAINS SUPPLY AGRICULTURE

COMPANIES HAVE A GOAL TO A GOAL HAVE COMPANIES INCREASE THEIR PORTFOLIO PROTEINS OF ALTERNATIVE 3 TRILLION IN MARKET $1.1 CAPITALISATION ABOUT THE COMPANIES ABOUT THE COMPANIES IN THE ENGAGEMENT ENGAGEMENT DRIVERS INVESTORS COMPANIES ENGAGEMENT 49

EVALUATION FRAMEWORK EVALUATION roadmap currently No clear issue. complex is a diversification Protein strategy. diversification a protein undertake to companies for exists of best based on a review this framework for the criteria developed FAIRR including strategy, areas, several across companies by food practices that includes elements and metrics. The criteria engagement innovation, increase to approach a comprehensive for will be necessary believe we is a first think this criteria We proteins. alternative to exposure company in public performance company evaluate investors helping towards step plant-based foods to access increasing towards and progress markets, proteins. and alternative based on their responses the criteria against companies assessed We also 2017. We 2016 and July in September sent letters investor the two to meetings/calls company from with notes the responses supplemented A high- available). (where and with public information relevant) (where members on page 58. FAIRR is available of the assessment overview level of each company. an in-depth assessment also received

Phase 2: Information gathering Phase 2: Information facilitated In phase 2, FAIRR with companies follow-up investor on how seek specific information to protein diversifying were they was to The objective sources. strategic clarify companies’ whether they including approach, a risk assessment had conducted protein current of their portfolio’s measure metrics to mix; developed protein different to their exposure their directing and were sources; plant- develop R&D budgets to Investors concepts. based product for a meeting asked specifically representatives with company responses. their discuss to had meetings with The coalition in the 50% of the companies engagement. Of the 16 companies, did not respond Foods Whole only and Costco request. the investor to investor Morrisons acknowledged but did not provide concerns an update.

Phase 1: Exploration engagement In phase 1, FAIRR’s food identified 16 global team – both manufacturers companies – based on their and retailers supply animal protein to exposure to chains and their sensitivity The objective trends. consumer awareness raise of phase 1 was to and with companies of the issue thinking. their current assess to by post contacted Companies were 2016, with and email in September as needed. Forty calls follow-up in with $1.25 trillion investors, 1. phase AUM, supported 13 sent Of the 16 companies, Kroger meaningful responses. did not respond, Foods and Whole was response and Costco’s inadequate. ENGAGEMENT PROCESS ENGAGEMENT

ENGAGEMENT Marissa LaFave Marissa Shareholder Advocate, Green Century Capital Management Century Capital Green Advocate, Shareholder if companies have in place protein diversification strategies to mitigate risks and reduce is linked to increasingly urgent environmental and public health risks. Investors want to know FAIRR’s Sustainable Protein engagement has provided us, the investor community, and plant-based protein market.” negative impact. Green Century Capital Management has been engaging on this issue since global diet. Along with FAIRR, we strive for a diet that takes a bigger bite from the growing companies with a framework to adapt to and profit from the shift toward a more sustainable 2016 given its direct connection to our core focus areas: climate change and deforestation. “The way global food companies like Walmart or Kraft Heinz source protein for their products DRIVERS INVESTORS COMPANIES ENGAGEMENT 51

The company is proactive about reducing animal ingredients in existing product ranges where technically and technically where ranges product in existing animal ingredients about reducing is proactive The company which products, from minor ingredients has said that it is removing Tesco example, For feasible. commercially do so with to able are they wherever and vegans, vegetarians for them unsuitable make quality. product overall no impact to The company reports relevant metrics externally to help investors assess company exposure to animal proteins animal proteins to exposure company assess help investors to metrics externally relevant reports The company and plant-based portfolios. The company takes part in several initiatives focused on finding solutions to the protein challenge. For example, example, For challenge. to the protein finding solutions on focused initiatives part in several takes The company to looking (Plant Meat Matters) researchers and academic of companies is part of a consortium Unilever a plant-based steak. develop Goals with clear timelines that can be accurately measured and reported. For example, by [date], XX% of our[date], by example, For and reported. measured accurately be that can timelines Goals with clear from will come category] in [product XX% of our sales or plant-based ingredients from will be derived proteins plant-based. entirely that are products A global metric that provides measurement of the company’s exposure to plant-based product sales. product plant-based to exposure of the company’s measurement provides metric that A global The company offers a variety of own-brand alternative proteins across categories. Their plant-based options are plant-based options are Their categories. across proteins alternative of own-brand a variety offers The company meat-free such as minces, range of meat alternatives extensive an offers Sainsbury’s example, For find. easy to It also offers brand. within its Sainsbury’s dairy alternatives as cheese and as well meat balls and burgers, meals. ready several Direct engagement with investor coalition. Candid discussion of drivers and barriers. The investor coalition had coalition The investor and barriers. of drivers Candid discussion coalition. engagement with investor Direct Ahold Mondelez, Nestlé, Kroger, companies: the following with practice as best meetings that met our criteria Delhaize and Tesco. Evidence of an R&D and product development strategy specifically focused on plant proteins. For example, example, For proteins. focused on plant specifically strategy development of an R&D and product Evidence proteins. on plant projects discovery to is dedicated of its R&D investment what percentage monitors Nestlé Reduction targets that specifically seek to reduce percentage-based absolute emissions from the agricultural the agricultural from emissions absolute percentage-based reduce to seek that specifically Reduction targets of: 35% by 2030 on 2015 levels based reductions, ‘absolute’ achieve aims to Tesco example, chain. For supply of 17% by 2030. 3’ reduction ‘Scope an overall to This will contribute emissions). agricultural (15% for A global metric that provides measurement of the company’s exposure to animal proteins and plant-based animal proteins to exposure of the company’s measurement provides metric that A global from derived are of its proteins what percentage this metric and monitors tracks Nestlé example, For proteins. plant-based ingredients. The retailer proactively seeks to offer customers innovative external alternatives to animal proteins across across animal proteins to alternatives external innovative customers offer seeks to proactively The retailer the carry in the US now 14 states across stores Kroger-owned select than 650 more example, For categories. in their meat aisles. Burger plant-based Beyond focused on increasing years, five in the last investment in start-up/incubation has been involved The manufacturer arm 301 Inc capital venture Mills’ General example, For plant-based products. on innovative portfolio its product Hill and Rhythm Foods. such as Kite including plant-based brands start-ups food in innovative invests The company has a comprehensive marketing and promotions strategy that is focused on growing sales from from sales on growing that is focused strategy and promotions marketing has a comprehensive The company advertising, and messaging; marketing design and development; including product plant-based products, to is hard practice best engagement. While customer and architecture; labelling; choice pricing and promotions; chain In 2016, the supermarket study. case a good presents Tesco involved, the many elements define, given a ‘fully released In addition, Tesco of Plant-Based Innovation. plant-based chef as its Director a celebrity hired and out-of-home marketing social, digital television, on healthy eating, including centred campaign integrated’ ranges. product plant-based ready-meal spots. It also developed What does best practice look like? look practice does best What

Does the company seek to reformulate existing product ranges ranges product existing reformulate seek to Does the company possible? where ingredients animal-derived substitute to Does the company report on protein sales and/or sourcing data and/or sourcing sales on protein report Does the company externally? Does the company participate in cross-sectoral collaborations collaborations in cross-sectoral participate Does the company diversification? on protein Does the company have goals to shift to diversified protein protein diversified shift to goals to have Does the company sources? Does the company track data on percentage of sales related to to related of sales on percentage data track Does the company products? non-protein own-brand Does the company market at least one range of own-brand, of own-brand, one range at least market Does the company products? protein alternative Has the company engaged with the investor coalition? engaged with the investor Has the company Does the company dedicate internal R&D internal dedicate Does the company development? product new to Does the company have a target to reduce supply-chain supply-chain reduce to a target have Does the company emissions? including agricultural emissions, Does the company track data on percentage of animal proteins of animal proteins on percentage data track Does the company products? its food for sourced protein portfolio? portfolio? protein made acquisitions or Has the company manufacturers For its alternative increase to investments start-up/incubation portfolio? protein Is the company proactively seeking to offer offer seeking to proactively Is the company retailers For its alternative increase to products external innovative Does the company engage with consumers and stakeholders and stakeholders engage with consumers Does the company to discuss the benefits of alternative proteins, and is this part proteins, the benefits of alternative discuss to strategy? and promotion marketing of a dedicated 5. 11. 4. 2. 10. 7. 12. 3. 1. 9. 6. 8. Criteria We We assessed the assessed We

One of the biggest

We assessed if assessed We

We assessed if companies had a if companies assessed We

Nearly all companies in our engagement all companies Nearly ENGAGEMENT companies were tracking, or had the ability to track, or had the ability to tracking, were companies if also assessed mix. We their protein measure to data externally. this data reporting were companies clear strategy to increase the number of alternative increase to strategy clear and/or development product through products protein of products and visibility acquisitions, and the variety online. offered engagement level of companies based on whether of companies engagement level of their discussion a candid for met with investors they on this issue. and performance progress Engagement with investors: Tracking and reporting: Tracking Consumer engagement: Product offers: Product Innovation and product development: development: product and Innovation Evaluation Framework Evaluation Strategy: assessed the extent to which companies focus on focus which companies to the extent assessed new develop R&D to and cross-sectoral internal and plant-based products. protein barriers to increased adoption is that consumers may is that consumers adoption increased to barriers of because alternatives protein not accept and health. We texture about taste, preconceptions were companies successfully how assessed and advertising branding marketing, food employing demand for create used to – long consumer drive – to categories product new alternatives. of protein acceptance seek to provide healthier product options and manage healthier product provide seek to GHG deforestation, chain impacts from their supply pollution. Protein use and water and emissions reducing to element is a necessary diversification companies’ assessed We in these areas. their impacts goals on strategies and/or sustainability business and protein emissions supply-chain to related diversification. DRIVERS INVESTORS COMPANIES ENGAGEMENT 53

Several companies referenced dedicated internal resources (R&D, resources internal dedicated referenced companies Several and/or on developing that focus procurement) development, product This is a and ingredients. products acquiring plant-based products. these demand for consumer of growing consequence and product up research scale can that companies believe We a from diversification also approach if they development risk-based perspective. development, product on new focusing currently Companies are animal-derived remove to products existing than reformulating rather ingredients. – have Mills and General Unilever – Nestlé, manufacturers Three their increase to made acquisitions or incubation investments of plant-based products. portfolio diversification on protein focused collaborations cross-sectoral Two Protein the Future’s for Forum participation are with the broadest Buying Better Institute’s Resources 2040 and the World Challenge system shift the protein to projects pilot on focuses Lab. The Forum on behavioral The Lab focuses resource-intensive. less become to foods. sustainable select help consumers to science

All companies now offer own-brand products that products own-brand offer now All companies growing to and/or dairy, responding meat substitute products. these demand for consumer • • • • budget, plan, with dedicated see: A strategic to like would What we mimic the that products protein alternative or procure develop to of animal proteins, profile and taste functional properties behavior. ‘nudge’ consumer to on how and research

– have some form of internal and external and external of internal some form – have and Unilever M&S, Nestlé within their businesses. diversity protein increased to goal linked with their supply chains. with their supply as being necessary and meat/dairy reduction proteins alternative for as a business. their impacts addressing for all despite this connection acknowledge to fail Other companies into diversification protein integrating from companies is preventing – companies three Only strategies. their business/sustainability from agriculture. Other companies are heavily exposed to meat to exposed heavily are Other companies agriculture. from the impacts associated but do not discuss and dairy products, the case articulate clearly and Unilever M&S, Nestlé Tesco, Only impacts such as GHG supply-chain address to of them working use and pollution. water deforestation, emissions, production animal protein to The lack of articulation on risks related M&S, Tesco, Walmart, General Mills, Nestlé General Walmart, – M&S, Tesco, six companies Only emissions supply-chain reduce to targets – have and Unilever We would like companies to set a quantitative goal to increase increase goal to set a quantitative to companies like would We findings. based on assessment sources protein alternative to exposure A risk assessment on the company’s exposure exposure on the company’s see: A risk assessment to like would What we continue can whether the business which assesses animal proteins, to trends. projected if meat and dairy follow sustainably operate to Ambitious targets to reduce emissions emissions reduce to see: Ambitious targets to like would What we • from livestock supply chains, while working to improve animal welfare, animal welfare, improve to working while chains, supply livestock from use. and manage water loss forest eliminate of protein the materiality Companies acknowledge to meet but primarily for their business, diversification to than as a way demand, rather changing consumer impacts. sustainability from growth decouple • • FINDINGS value- the majority of for accounting agriculture Despite any do not have companies most chain emissions, reduce and report track, to meaningful programmes agriculture. to related emissions supply-chain • ENGAGEMENT DRIVERS INVESTORS COMPANIES ENGAGEMENT 55

Costco has impacts: Costco environmental of livestock’s No discussion no meaningful discussion on emissions associated with livestock with livestock associated on emissions no meaningful discussion also We 3 emissions. Scope or target not measure and does farming, which farming, livestock to use related of water no discussion found of agriculture. footprint water of the total one third for accounts per calorie footprint water that the average has estimated Research roots. and starchy cereals than for beef is 20 times larger for chains: supply risks in its livestock reputational faces Costco expected – plant in Nebraska processing planned chicken Costco’s protests community – is facing largest be one of the country’s to will impact expansion farming that the associated fears due to quality. water local most Unlike offerings: its protein diversify has no plans to Costco label, Kirkland brand private in our engagement, Costco’s other retailers – indicating of dairy substitutes range a limited only offers Signature, product company’s the for focus of area an not is proteins alternative that of external a wide range offers Costco While teams. development as items categorise does not clearly its website plant-based brands, demand from substantial has said that it has not received such. Costco of that demand, In the absence these offerings. expand to customers do so. does not plan to currently Costco responses sent inadequate Costco investors: engagement with Poor meetings. for requests to and did not respond letters investor to COSTCO DOES NOT ADDRESS RISKS ASSOCIATED WITH ITS WITH ASSOCIATED RISKS ADDRESS DOES NOT COSTCO CHAINS SUPPLY LIVESTOCK Costco is one the world’s largest meat sellers. Annually, it sells around around it sells Annually, meat sellers. largest is one the world’s Costco largest and is one the world’s in the US, chickens 83 million rotisserie is building the company meet demand, To prime beef. and of choice sellers each 100 million birds process to plant that is expected a poultry processing the of its business, and influence and the scale this exposure Despite year. of its footprint the environmental address does not meaningfully company diversification protein it does not regard Furthermore, chains. meat supply business. the for issue as a material • • • •

track an enterprise-wide metric on the an enterprise-wide track and Unilever Nestlé animal from derived that are of their proteins percentage and plant-based ingredients. to identify the right difficult particularly it has proven retailers, For within categories of its products the percentage shared metrics. Tesco shape to placed best are that it believes and grocery) frozen (chilled, customers. for offers or vegan meat-free that sugar and salt, it is important reduce to the movement Similar to define the right metrics as a way of manufacturers and retailers their exposure increase to targets and setting measuring progress proteins. alternative to Retailers in the engagement expressed reluctance to ‘lead’ or ‘create’ or ‘create’ ‘lead’ to reluctance in the engagement expressed Retailers to respond than simply shifting diets, rather demand for consumer demand. existing architecture about the right choice is a lack of consensus There buy meat and dairy substitutes. to nudge consumers to interventions to the meat/dairy aisles in these products placed have Some companies in displaying these products advocate Others their appeal. broaden follow that consumers to help locations identifiable but easily separate it crucial consensus makes lack of This specific diets (vegan/vegetarian). consumer monitor continuously that can systems have to companies for habits. change purchasing to level at the sub-category preferences consumers. attract to label products to on how exists Similar confusion that using Buying Lab suggests the Better from research Recent orvegan like terms than healthy restrictive indulgent labels, rather choosing alternative of people the proportion increase can vegetarian, n.d.). Institute Resources (World products protein to alternative protein sources. protein alternative to • Very few companies have developed the right metrics the right developed have companies few Very exposure on increasing progress and track capture to • • companies’ measure see: Metrics that accurately to like would What we realistic can set so that firms ingredients, animal-derived to exposure it. reduce to targets Companies are struggling to develop coherent messaging messaging coherent develop to struggling are Companies consumption encourage and promote to and marketing products. protein of alternative • • • is based on capturing plan that see: A marketing to like would What we are animal proteins where category in every share market and growing consumed. widely ENGAGEMENT DRIVERS INVESTORS COMPANIES ENGAGEMENT 57

While Nestlé does not Nestlé While emissions: 3 Scope tackle to target Strong 3 GHG Scope reduce to target a it has call out agriculture, specifically 2014 and 2020. by 8% between emissions to In its letter consumption: protein to risk related Acknowledges shape sustainable the need to recognises Nestlé investors, generations. future the planet for preserve to consumption Nestlé proteins: alternative investigate to process research Robust including innovation, on protein focused network R&D has an internal external summit where an annual protein It organises plant proteins. a Over developments. on the latest present to invited are experts on projects discovery to is dedicated of its R&D investment quarter and compliance, aimed at ensuring safety These are plant proteins. a has also hired Nestlé nutritional profiles. sound and delivering of plant protein development coordinate to buyer strategic dedicated with suppliers. ingredients met representatives Nestlé engagement with investors: Strong of its plans and discussion a candid for coalition with the investor all investor to responded They proteins. on alternative progress answers. with detailed questions

MANUFACTURER: NESTLÉ MANUFACTURER: leads: Why Nestlé • • • •

on alternative proteins. They responded to all investor questions all investor to responded They proteins. on alternative of consumers, not just vegans. not just of consumers, met representatives Tesco engagement with investors: Strong of its plans and progress discussion a candid for with investors answers. with detailed Tesco has a Tesco emissions: livestock tackle to programme Strong with its associated emissions reduce to programme comprehensive agricultural reduce to chains. It has also set a target supply livestock by 15% by 2030. emissions to In its letter consumption: protein to risk related Acknowledges sustainability that in addition to recognises Tesco investors, to plant-based diets will be necessary livestock, to improvements targets. meet its supply-chain development product innovative demand through Leading consumer a how for study case a best-practice presents Tesco and marketing: and proteins alternative demand for consumer lead can retailer meals with 20 ready In January 2018, it introduced plant-based foods. by its developed brand, Kitchen plant-based options under its Wicked chef. celebrity who is a well-known of plant-based innovation director media coverage, extensive has attracted brand of the The marketing a wide range appeal to and its labelling is designed to

• COMPANIES WITH LEADING APPROACHES COMPANIES TESCO RETAILER: leads: Why Tesco • • •

CORPORATE ACTIONS SUPPORTING Information not available, not disclosed or not sufficient Some evidence found to support the statement PROTEIN DIVERSIFICATION Best practice INVESTORS

Goals on protein Strategy Target on agriculture emissions COMPANIES Dedicated R&D for product development

Involvement in cross- sectoral collaborations Product development Product Reformulation on existing products ENGAGEMENT Primarily sells Not applicable Seeks out innovative own-brand external products Acquisitions or start-up/incubation Not applicable investments Product offers Product

Markets own brands

Dedicated marketing

Consumer Consumer and promotion strategy engagement

Tracks data on % of animal proteins sourced

Tracks data on % of sales in alternative protein products Tracking and reporting Tracking

Reports data externally

Candid discussion Met with Candid discussion Met with Candid discussion Met with No Did not Did not Did not Inadequate Candid discussion Did not Did not Candid discussion Did not Met with investor on progress investors on progress investors on progress investors response meet meet meet response on progress meet meet on progress meet coalition* Engagement with investors Tesco M&S Ahold- Sainsbury’s Kroger Walmart WholeFoods Ocado Morrisons The Co-op Costco Nestlé Unilever General Mondelez Kraft Delhaize Group Mills Heinz Retailers Manufacturers 59 *Investors participating in company dialogues included Aviva, Robeco, Nordea, Actiam, Candriam, Green Century Capital Management and Triodos Bank. DRIVERS INVESTORS COMPANIES ENGAGEMENT 61

REFERENCES REFERENCES Market. Meat Substitute 2016. Research, Allied Market https://www.alliedmarketresearch.com/meat-substitute-market https://www.alliedmarketresearch.com/meat-substitute-market Meat Scandal.’ After Initial Offering York Delay New Said to 2017. ‘JBS Bloomberg, https://www.bloomberg.com/news/articles/2017-05-10/jbs-said-to-delay-new- york-initial-offering-after-meat-scandal Growth. for Poised Meat Market 2017. Substitute Intelligence, Bloomberg and investment strike and Good Karma Foods 2017. ‘Dean Foods Dean Foods, http://www.deanfoods.com/ growth.’ brand accelerate deal to distribution our-company/news-room/press-release.aspx?StoryID=2270482 water?’https://www.economist. Zealand’s in New 2017. ‘What’s The Economist, com/blogs/economist-explains/2017/12/economist-explains with meat, associated causes different from et al., 2017. ‘Mortality Arash Etemadi, in the NIH-AARP Diet and Health Study: and nitrites nitrates, heme iron, 2017, 357: j1957. http://www.bmj.com/ BMJ study.’ population based cohort content/357/bmj.j1957 for plant-based milk.’ identifies appetite Financial Times, 2016. ‘Big business https://www.ft.com/content/7df72c04-491a-11e6-8d68-72e9211e86ab A., Opio, C., Dijkman, J., B., Mottet, H., Henderson, J., Steinfeld, Gerber, P. – A livestock change through climate G., 2013. Tackling A. and Tempio, Falcucci, and and mitigation opportunities. Food of emissions assessment global Rome. Nations (FAO), United of the Organization Agriculture Trends’. and ‘2018 Food Trends’ 2017 and 2018. ‘2017 Food Forums, Food Global and https://www.globalfoodforums.com/food-news-bites/2017-food-trends/ https://www.globalfoodforums.com/food-news-bites/2018-food-trends/ and Nielsen, 2017. ‘Plant Association Plant Based Foods Institute, Good Food http://www. Year.’ Past Over Growth 8.1 Percent Experience Sales Based Foods prweb.com/releases/2017/09/prweb14683840.htm near life stench: and an unbearable of feces million tons 2017a. ‘A The Guardian, https://www.theguardian.com/us-news/2017/sep/20/ pig farms.’ industrial north-carolina-hog-industry-pig-farms farming the US model of intensive how 2017b. ‘Rise of mega farms: The Guardian, https://www.theguardian.com/environment/2017/jul/18/ the world.’ is invading rise-of-mega-farms-how-the-us-model-of-intensive-farming-is-invading-the- world 2017. ‘Substituting W., and Ripple, S. Harwatt, H., Sabaté, J., Eshel, G., Soret, Climatic change targets’. US climate toward beef as a contribution beans for Change 2017, 143: 1-2. https://link.springer.com/ article/10.1007%2Fs10584-017-1969-1

The FAIRR The FAIRR FAIRR Founder Jeremy Coller gave gave Coller Jeremy Founder FAIRR FAIRR organised an investor briefing to discuss the risks and to discuss briefing an investor organised FAIRR speakers featuring chains, supply by protein opportunities presented Impax Ventures, Tyson Lux Research, Institute, The Good Food from Century and Green Institute Resources Management, the World Asset Management Capital Environmental European for COP 23, Bonn: As part of the Institute FAIRR’s EU agriculture, low-carbon on pathways to event (IEEP)’s Policy developed-world the need for on Maria Lettini presented Director emissions livestock reduce urgently to countries in Stockholm: Forum Food EAT FAIRR’S WORK TO ENGAGE ENGAGE TO WORK FAIRR’S STAKEHOLDERS of stakeholders, with a wide range in partnership and work engage We and academics. regulators NGOs, groups, including investor 2017: A snapshot from Investment: Responsible for – Principles PRI in Person global to and innovation technology on food a session presented team on conference global the leading at the 2017 PRI in Person, investors investment responsible : NYC Berman, by Neuberger hosted event protein Sustainable on FAIRR’s issues to an audience of local authority pension funds of local an audience to issues on FAIRR’s a plenary session to the conference’s influential audience on the risks influential audience the conference’s to session a plenary and opportunities presented production livestock intensive to linked proteins by sustainable food renowned joined Coller Jeremy San Francisco: Conference, Ceres and CEO Ethan Meat Founder and Beyond Mark Bittman journalist sustainability of food on the importance discussion in a plenary Brown investors for 2017: Annual Conference Plan Forum Authority Pension Local presented Coller Jeremy Investors, Aviva member FAIRR Alongside

ENGAGEMENT Milken Conference 2017 Conference Milken Jeremy Coller Coller Jeremy DRIVERS INVESTORS COMPANIES ENGAGEMENT 63

JOIN FAIRR’S COLLABORATIVE COLLABORATIVE JOIN FAIRR’S ON SUSTAINABLE ENGAGEMENT PROTEIN Our engagement on sustainable protein calls on global retailers and retailers on global calls protein Our engagement on sustainable sustainable about building think strategically to manufacturers food chains. supply protein with combined by 57 investors backed The engagement is currently of $2.4 trillion. under management assets engagement team: the FAIRR contact more, learn To Rosie Wardle Engagements Head of Investor [email protected] Aarti Ramachandran Engagement and Corporate Head of Research [email protected] Jo Raven Officer Engagement Investor [email protected] Hedenus, F., Wirsenius, S. & Johansson, D.J.A., 2014. ‘The importance of reduced of reduced ‘The importance D.J.A., 2014. S. & Johansson, Wirsenius, Hedenus, F., change targets.’ climate meeting stringent for consumption meat and dairy 2014, 124: 79. https://doi.org/10.1007/s10584-014-1104-5 Climatic Change the Protein Changing Are Plant Sources 2014. WhooPea: Lux Research, https://members.luxresearchinc.com/research/report/16091 Landscape. 5.96 Billion USD by worth Market Substitutes n.d. ‘Meat MarketsandMarkets. https://www.marketsandmarkets.com/ 24 January 2018. 2022.’ Accessed PressReleases/meat-substitutes.asp in Germany.’ Meat Alternatives Hungry For Are Consumers 2015. ‘Young Mintel, http://www.mintel.com/press-centre/food-and-drink/young-consumers-are- hungry-for-meat-alternatives-in-germany https:// demand grows.’ as meat-free in innovation leads 2017. ‘Europe Mintel, www.foodnavigator.com/Article/2017/08/24/Europe-leads-in-innovation-as-meat- free-demand-grows# among North gaining dollar share are proteins Nielsen, 2017, ‘Plant-based http://www.nielsen.com/us/en/insights/news/2017/plant-based- Americans’. proteins-are-gaining-dollar-share-among-north-americans.html 2017–2026. OECD Publishing, Outlook Agricultural 2017. OECD-FAO OECD/FAO, http://dx.doi.org/10.1787/agr_outlook-2017-en Paris. Region Growing Fastest to be the Pacific 2017. ‘Asia Research, Market Persistence During 2017 – 2025.’ https://www. Market Proteins Plant-Based in the Global persistencemarketresearch.com/mediarelease/plantbased-protein-market.asp in of 800 hamburgers eat the equivalent will American Quartz, 2018. ‘The average 2018.’ https://qz.com/1171669/the-average-american-will-eat-the-equivalent-of- 800-hamburgers-in-2018 https://research. Growth! Your Will Steal out... or They Rabobank, 2017. Watch rabobank.com/far/en/sectors/animal-protein/Why-Alternative-Proteins-Are- Competing-for-the-Centre-of-the-Plate.html 2017–2021. https://www. Market Plant Protein 2017. Global and Markets, Research researchandmarkets.com/research/gsv3jm/global_plant and Sustainability Diets Link Environmental Tilman, D. and Clark, M., 2014. ‘Global 515: 518–22. https://www.nature.com/articles/nature13959 Human Health.’ Nature animals.’ use in food et al., 2017. ‘Reducing antimicrobial P. T. Boeckel, Van 357, 6358: 1350–2. http://science.sciencemag.org/content/357/6358/1350. Science full and P. Kokko, T., J., Tuomainen, S., Mursu, Voutilainen, H., Koskinen, T., Virtanen, in of type 2 diabetes and risk proteins dietary of different J., 2017. ‘Intake Virtanen, British Journal of Study.’ men: The Kuopio Ischaemic Heart Disease Risk Factor Nutrition 117(6): 882–93. https://doi.org/10.1017/S0007114517000745 and factors methane emissions O., 2017. ‘Revised T. G. R. & West J., Asrar, Wolf, Carbon Balance livestock.’ for global fluxes annual carbon distributed spatially Management 2017, 12(1):16. https://doi.org/10.1186/s13021-017-0084-y http://www. Future. Food a Sustainable 2014. Creating Institute, Resources World wri.org/resources/presentations/creating-sustainable-food-future-improving- productivity-and-environmental of Innovation.’ Areas Buying Lab: Three n.d. ‘Better Institute. Resources World 24 January 2018. http://www.wri.org/our-work/project/better-buying- Accessed lab/three-areas-innovation ENGAGEMENT GREENHOUSE GAS ANTIBIOTIC EMISSIONS RESISTANCE

POLLUTION WASTE

WORKING DISEASE CONDITIONS

PUBLIC OPPOSITION LOSS OF SUBSIDIES

CHANGES IN REGULATION