Investors representing $17.1tn in combined assets have called on the Food and Agriculture Organisation (FAO) of the United Nations (UN) to produce a global roadmap to reducing global warming by 1.5°C.
The letter, written by the Farm Animal Investment Risk and Return (FAIRR) Initiative, which was established by the Jeremy Coller Foundation in 2015, calls for a clear roadmap for the agriculture, forestry and other land use (AFOLU) sector to a sustainable food system by 2050.
They are calling for a roadmap that aligns with the Paris Agreement, while ensuring the protection and restoration of nature, and achieving food and nutrition goals.
“As investors, we recognise the financially material risks to which the food system is exposed, from climate change, biodiversity loss, malnutrition and antimicrobial resistance, as well as the material impacts that food system activities have on the environment.
"Accordingly, we urge the FAO to produce a global roadmap to 2050 that mitigates these risks and sets a standard for the industry”, says the investor letter.
The letter has been backed by former President of Ireland Mary Robinson and former UN Secretary General Ban Ki-Moon.
Land-based mitigation necessary
The letter details that in addition to accounting for one third of global greenhouse gas emissions, agriculture is the main threat to 86% of species at risk of extinction.
They note that three-quarters of the deforestation in the Amazon between 1978 and 2020 was caused by cattle ranching.
Citing research published in Science Journal in 2020 from the Oxford Martin School, the letter states that even if fossil fuel emissions were eliminated immediately, food system emissions alone would make it impossible to reach 1.5°C.
They note this has implications for food security. Referencing the Intergovernmental Panel on Climate Change (IPCC) special report on climate change and land, the letter points out that all assessed modelled pathways that limit warming to 1.5°C or well below 2°C require land-based mitigation and land-use change.
The investors also state that a clear pathway is required for methane emissions, as agriculture accounts for about 40% of human-generated methane emissions.
Energy pathway exists
Investors are increasingly aligning portfolios to address climate and nature risks, according to the FAIRR letter.
A central roadmap with key milestones can help investors align portfolios and engage with portfolio companies to minimise climate and biodiversity risks, they say.
Increasingly, environmental sustainability is becoming a key requirement for investors. However, critically, European regulation requires greater reporting by financial institutions regarding the sustainability of investments.
Investors too are concerned about the potential of invested assets to become stranded (suffer unanticipated write downs, devaluation or conversion to liabilities) at some point in the lifetime of the investment.
The letter notes that the International Energy Agency’s net zero roadmap demonstrates the pathway for the energy sector and similar is required for global agriculture.
Critically, the letter notes that with the right tools, investors can support a global food system transition. Investors have played a critical role in accelerating the energy transition in recent years they say.
What is FAIRR?
The FAIRR initiative is an investor network with 150 members that have $68tn assets under management.
Essentially, members of this network provide funding to, among other business, the largest international global food businesses.
It is almost ironic to see the energy sector, which is an intensely fossil-based sector that has contributed significantly to human-induced global warming, being held up as the exemplar by FAIRR.
The fact is that the investment community, multinational corporates and businesses of all sizes need to convince their customers, boards, investors and regulators that their activities are increasingly sustainable from a climate and environmental perspective.
There is a reasonable acceptance that transition will be incremental, albeit somewhat accelerated in the next decade, aligned to defined pathways.
The FAIRR investor letter would indicate that there will be no acceptance or tolerance of the unplanned approach.
Ultimately, investors are seeking the tools to help them understand the risk in the agri-food sector. This appears to be a warning from investors that in order to keep the flow of funding to the agri-food sector, in particular livestock agriculture, a roadmap is now required.