Alternative food: a taste of things to come

Traditional agriculture must evolve if climate change is to be conquered. That means investors have an opportunity to make an impact by backing low-carbon alternative proteins and dairy, as well as high-tech farming.

Beyond Meat burgers have a carbon footprint that’s 90% less than your traditional burger, according to the Los Angeles-based producer of plant-based meat substitutes.¹

At a time of freak weather events from heatwaves to droughts to floods blamed on man-made climate change, they’re not just tasty but also good for the planet. Indeed, there’s a food revolution cooking among alternative protein pioneers such as Beyond Meat and Oatly, the Swedish company producing alternative milk, ice cream and yoghurts from oats.

Signaling a shift in consumer preference, sales of alternative protein and dairy have been surging, with good reason as they produce more food with less environmental impact. Alternative protein sales alone are forecast to grow by almost a third annually between 2018 and 2025, according to UBS, the bank (see graph below).

Shifting consumer preferences present opportunity

Global Alternative Protein Sales Growth

Global Plant-Based Beverage sales

Source: UBS. As of December 2020.

Agriculture’s pressing need to cut carbon

If truth be told, existing methods of food production must change in order to successfully tackle climate change. Currently, agriculture, forestry and other land use account for close to a quarter (24%) of global CO₂ emissions. That’s almost as much as electricity and heat production (see chart).

Climate initiatives can’t succeed without addressing agriculture

Contribution to Green house Gas (GHG) Emissions

Source: Brookings Institute. Data as of December 2020.

Eating alternative meats or dairy brings huge savings in terms of CO2 and water consumption. Think not only of Beyond Meat, but also Oatly. Compared with cow’s milk, producing its dairy products takes 60% less energy and 79% less land. Its carbon emissions are 69% less (see chart).

Oatly’s small environmental footprint

Source: Oatly.

Beyond alternative protein and dairy, high-tech agriculture has great potential. Take AppHarvest, which tends indoor farms in the eastern United States. Its farms use up to 90% less water than traditional agriculture, with crop yields of up to 30 times more.²

The rest of the dish

While alternative proteins and high-tech agriculture are at the leading edge of the future of food, other companies are also part of the evolution. For instance, companies able to enhance the taste, texture and sensory experience of plant-based meats – which otherwise taste like cardboard – are part of the mix. So, too, are organic food companies and food producers with solid environmental, social and governance credentials.

Investing in food’s future

Our Future of Food ETF reflects our views about the likely future of food. While alternative protein pioneers like Beyond Meat and Oatly form its core, it also holds indoor farms like AppHarvest, flavoring businesses and so on.

Alternative proteins and other futuristic foods are becoming more than a side order – they’re moving into our fast-food restaurants and supermarkets. We believe that investing in them is an opportunity to benefit from fast-shifting consumer preferences, and to make a positive impact on the planet at the same time.

Risk: You may lose money up to the total loss of your investment due to Emerging Markets Risk and Sector Concentration Risk.