by Lombard Odier

Can food innovation save the climate?

Alice Ross, the FT’s Deputy News Editor outlines the impact agriculture is having on the environment, and what can be done to alleviate the damage. 

“Agriculture alone makes up 11 per cent of global greenhouse gas emissions. But if you add in other activities like storage, packaging, food waste, things like that, it goes up to as much as 37 per cent. It's a huge problem.” 

But as Ross explains, there are developments afoot, ranging from changes in consumer behaviour to new technologies, to financing, that could significantly reduce food’s impact on the environment.  

“There was a letter written recently in BioScience magazine and it was signed by 11,000 scientists. And they basically said that if we did things like eating more plant based foods, eating less meat, that this could have a huge impact on greenhouse gas emissions as a result of food.”

“I think people are changing the way they eat. I think you can just see from all the people that you see around you. People are massively changing their eating habits because they know that what they eat has an impact on the environment. For sure. We've got a lot more veganism on the rise, vegetarianism, people eating less meat. So, I think the message is coming through to some extent, but there are a lot of other things that people are doing as well, apart from changing their diet.”

“One area that has attracted huge interest in the last couple of years is plant-based protein. Lab-grown meat is another area where there's a lot of innovation. A lot of people are trying to get it right. They'll take some cells from an animal, almost like cloning, and then they'll grow the meat in a lab. So actually, no animals are being harmed in that process. And then you're actually eating meat, but in a more environmentally friendly way and there's less animal cruelty as well. But those kinds of companies are very early start-up. None of them have come to market with the product yet.”

“We're also seeing things like vertical farming. So just as people are starting to grow meat inside labs, people are starting to grow plants inside warehouses. Vertical farming could be good because it makes the supply chain shorter. It reduces transport costs, things like that. But it uses a lot of electricity inside the indoor farm, and a lot of this isn't fully worked out in terms of the technology.”

She outlines other technological developments.

“Farmers can use technology like drones or satellites to use exactly the right amount of water and fertiliser for their crops. There are apps that you can use now where it will tell you what sort of food the consumers are throwing away, and then it will help the restaurant to produce less of that food and more of another kind of food.”

“In order for some of this new technology to work, we do need investors to back it. And fortunately, that is happening. Investment in food start-ups doubled in 2019 to hit more than a billion dollars. The new technology is definitely here to stay. I think you can see that as the technology improves, more people are going to adjust their eating habits. So, it's driven a lot by consumers changing their eating habits. It's driven a lot by investors backing this new technology and in terms of governments, what they can do is introduce stricter regulations on food waste, for example, on recycling, on energy efficiency. That's one of the big areas generally in climate change where governments can really get involved.”

“Tech has been a big disruptor in many other industries, as we know. So far, it hasn't made that many inroads into farming. That's good because it means that there's a lot of room for development. The downside, I guess, is that if only it had been done before, we would maybe have fewer emissions now.” 

Ross says that financing in the ESG arena is also undergoing changes. 

“Another area that's changing quite rapidly is the interest in sustainability-linked loans, where banks are making loans to companies and the interest rate that they pay on that loan will fluctuate according to whether they're hitting certain ethical or environmental targets.”

“Green bonds are a really quickly, rapidly growing area of finance, but historically there have been way more green bonds in renewable energy than agriculture, which has very much been a sort of a laggard. When something isn't very developed, you can always say there's a lot of potential in it.” 

“It can be an issue for ESG investors who aren't necessarily rushing to pile into the food industry, because it's quite hard to measure the food industry’s sustainability, because you have a lot going on. You've got things like packaging, transport, long supply chains.” 

She can also see the structure of the market changing. 

“So, it’s not just about start-ups. At the moment, there's a lot of interest in the new guys, the smaller players, the new technology, but we're also seeing that the larger, more established food companies, household names are also backing this kind of thing. If these big food companies that have a lot of research and development budgets are also looking at developing their own alternative meat products or their own plant-based products, that means that they might quickly overtake some of these smaller start-up companies that are going to struggle for various other financial reasons. I don't know for sure, but I assume that you don't have to invest that much in it upfront. So, if you get a decent alternative meat product that sort of anyone could do, it's not like it takes ages to set it up. So that means that lots of other companies could jump in.”

The food industry may have been slower than some to embrace sustainable practises, but Ross believes it may have an advantage when it comes to flexibility. 

“You can compare it to other industries like the oil and gas industries. Traditional food companies can pivot their business models more quickly than an oil and gas company, so can become more sustainable, more easily than a big oil major.”

In terms of disruption to the food industry we’re sort of in the foothills of that happening at the moment, which means there's a long way to go, but that it's also quite exciting.”

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FT Rethink series focuses on the people, technology, strategies and systems moving us from an economy that is wasteful, idle, lopsided and dirty towards one that is circular, lean, inclusive and clean. The channel alternates between independent reporting from FT journalists and business perspectives from Lombard Odier