Satellite images of unchecked forest fires across the Amazon have elicited international concern, as one of the planet’s most important natural systems for capturing and sequestering CO2 comes under significant strain. (ddp)

Worse, much of the land clear cut by these fires is typically converted to ranch and pasture use, effectively swapping out a significant carbon sink for carbon-intensive beef production. A recent UN climate report has directly linked agricultural land use and meat consumption with climate change outcomes.

The environmental headlines are worrying, but there are reasons for optimism, too, as exemplified by the world’s current enthusiasm for plant-based meats. As environmental concerns linked to food production only grow, we examine the lessons investors can draw from the rapid rise of this new product class:

  • Healthy living: Plant-based burgers offer consumers a way to sidestep red meats, which have been tied to increased cancer risks by WHO and IJC studies. This same health awareness has led to the proliferation of day-to-day health trackers, from activity and sleep tracking bands to calorie counting apps. The trend towards healthier eating and living has seen health and wellness expand to a near USD 769bn industry, or around 30%of the global packaged food market.

  • Mindful eating: On average, plant-based burgers from Impossible and Beyond generate 89% less greenhouse gas emissions, require 94%less land, and have a 93% smaller water footprint. This penchant for sustainable foods and brands is increasingly evident across millennial consumption patterns. A 2019 study from KPMG showed millennials were four times as likely as baby boomers to avoid products from multinational food companies. And with millennials set to account for 40% of all consumers next year, their growing political clout could lead to more efforts like Germany’s proposed meat tax.

  • Digitalization: Advanced food science is behind many new animal protein alternatives, from genetically engineered yeast-based theme that evokes the taste of blood, to stem-cell based processes that replicate actual meat in a lab. Disruption has only just begun in the agriculture sector, with digital penetration estimated at just 0.3% in 2018, compared to 12% for retail. This will change, as big data analytics, biological and CRISPR advances, and more efficient processes like vertical farming go mainstream.

So while we take a clear-headed view on the environmental and food system challenges ahead, we believe smart capital can play a critical and profitable role in funding these advances. We forecast food innovation will grow to a USD 700bn market by 2030 – a fivefold jump from today.

Main contributors - Mark Haefele, Wayne Gordon, Christopher Swann, Jon Gordon

Content is a product of the Chief Investment Office (CIO).

Original report - Plant-based meat hints at climate change solutions, 23 August 2019.