The food system is a big business and long has been. But increasingly, a significant portion of the business is at risk from the impacts of climate change. In addition to being at risk, it is also a business that puts the climate at risk in and of itself, as it is a major contributor to planet-warming emissions such as methane.
Over a decade ago, the Smith School for Enterprise and the Environment at Oxford University warned that many agricultural facilities were at risk of becoming vastly outdated and hazardous, as investment assets would become liabilities, a concept more associated with fossil fuel industries such as coal, oil, and gas than with farms and food production.
While the food sector’s risks are not as blatant as those associated with fossil fuels, they are still there. Isobel Rosen, the investor outreach senior analyst at the food sector investor network FAIRR, which represents 400 investors worldwide, warns that there are still significant risks. These include physical impacts such as drought, flooding, heatwaves, changes in rainfall patterns and growing zones, and increased disease risk. The food sector also faces transition risks such as stricter regulations, higher fuel prices, changing consumer tastes, and higher competition for scarce resources such as water.
The livestock sector is a leading contributor to methane emissions. It is also highly susceptible to increasing feed price volatility and the emergence of plant-based or lab-grown meat alternatives. A recent FAIRR analysis opened new tabs and suggested that half of the biggest livestock companies could be lost entirely by 2030 because of climate-related costs.
That makes for a complicated landscape for companies and investors to navigate, particularly because there is a significant gap between farmers, the investment community, and consumers when it comes to these issues. “The sector still lags in understanding its impacts, risks, and dependencies on nature,” Rosen says. “Many of them are making progress, but it’s often ad hoc, without any strategy behind it.”
Rosen adds that making things even more difficult is an unshakable sense of complacency among companies and investors. Only six had conducted their climate analysis when FAIRR assessed 40 livestock and dairy companies, a shockingly low number.
Peter Elwin, head of Planet Tracker’s food and land use, says: “The food system is very complicated, and investor exposure is quite patchy. Most investment is in downstream and midstream companies—giants such as Nestle and Unilever, supermarkets such as Tesco and Sainsbury’s, or restaurant chains such as McDonald’s. They don’t generally invest in farmers and ranchers because growing food has always been high-risk and low-margin.”
Meanwhile, Nusa Urbancic, CEO of Changing Markets Foundation, says that those risks increasingly manifest themselves. In 2023, for example, beef prices in the U.S. hit a record high as drought caused feed costs to rise, and the amount of cattle fell to its lowest level for 61 years. Heatwaves and droughts from the Mediterranean to West Africa and Asia have also caused soaring prices for products ranging from olive oil to rice and cocoa. In contrast, wet weather in northern Europe has caused a sharp rise in the cost of potatoes. “Although we’re increasingly seeing the impact in the real world, the sense of urgency has not reached many in the farming sector,” Urbancic warns.
Denmark’s livestock levy (under which from 2030 onward, farmers will be charged 300 Danish kroner per ton of CO2 produced per year, rising to 750 Danish kroner in 2035) could be a precursor to an EU agricultural emissions trading scheme, says Urbancic, with Brussels, currently consulting on the plan.
Something has to be done to both save what remains of the food industry and salvage what remains of our climate’s health before it is truly too late, and if the businesses are unwilling to comply, foundations such as Changing Markets will be forced to implement legislation.
