I’m not sure what to make of the strikes in schools and colleges across the country about climate change. On one level it is hugely heartening that so many youngsters are willing to work together to battle climate change. But as Rod Liddle pointed out, it is a one-sided form of virtue signaling where I am sure that teachers supporting this would be horrified if said students protested for Brexit or against immigration. I also worry that the absolutist positions taken by this movement and the Extinction Rebellion crew might actually more harm than good. When faced with the challenge to do so much by 2025, ordinary voters might simply adopt a position of see no evil, hear evil, speak no evil. I’m not sure that banning all types of diesel, going completely vegan and stopping all air flights in the space of a few years is really going to gain traction.

Better I think a gradualist but honest process which looks at how we can achieve some early quick wins which can then be banked on and used as the basis of a push for more ambitious goals. For instance, let’s get the world’s billionaires to sit down and fund a No Coal Fund which buys all the worlds coal-fired power stations, shuts them down and offers to replace them with gas, renewables or nuclear rigs. Concrete production is also another area where we could make really big impacts by collectively working together to shut down the most egregious plants. Lastly agriculture, where I think collective action at a global level could make a huge difference. Its plainly obvious that meat production will increase and that red meat, in particular, will become more popular. This really isn’t sustainable at a planetary level – as a recent really excellent report by Barclays investment bank points out, cattle, emit a total of 4.7 gigatonnes of CO2 equivalents (CO2e), or 9% of all human-induced emissions.

Barclay’s analysts go on to observe that

“Burping cows are more damaging to the climate than all the cars on this planet: Population growth, increasing incomes and ‘westernisation‘ of diets mean that demand for food and animal protein is only set to increase. All else being equal, we estimate that over the next 30 years overall cattle-related pollution is set to increase today’s methane emissions by over 15% and the world’s total carbon footprint by 5%. “

Here’s the simply brilliant infographic that sums up the report.

My own hunch is that long term we will move to artificial meat substitutes which won’t make vegans happy – it’ll look, taste and smell like beef steaks but it will be chemically produced.

In the short term, we’re going to have to think about three strategies, all outlined in the Barclays report.

The first is to replace red meat with other animal products – the Barclays report suggests that switching from 1kg of beef into 1kg of pork or chicken could reduce the associated emissions by 88%. Next up we’re going to think about new forms of animal feed which drastically cut back carbon emissions – Barclay’s observes that “Novel feed ingredients are being launched that have the potential to reduce methane emissions by 25-30% and improve the farmer’s yield. We estimate the market potential of these additives is between USD 1-4 billion.” Lastly, we are going to be forced to increase “carbon capture and storage through land-use/reforestation/pasture management”. The report notes that the beef sector’s emissions could be reduced by approximately 30% if producers in a given system, region and agroecological zone applied the practices of the most efficient 10% of producers.

The key takeaway though is that farmers will increasingly be held account for their emissions and government’s will have to intervene. “We were surprised that the EU has set no explicit targets for reducing greenhouse gas emissions from agriculture, especially given the strict regulations it has put in place for the transport sector as well as other industries”.

IMHO many of the measures suggested in this report are low hanging fruit i.e with a will, the right amount of capital for innovation and the right regulatory nudging we can achieve some big changes very quickly (over the next five to ten years).

And for investors, there’ll be some obvious winners. I’d highlight three stand out stats from the corporate side of the equation.

  • “Beef operations have a very thin profit margin and profitability trends are not always in favor of all players at the same time. As a rule of thumb one could say that when slaughter operations run decent profit margins (i.e. 6-8% EBIT), farmers – depending on levels of grain prices – tend to just yield operating break even.
  • Ultimately, McDonald’s expects to prevent 150m metric tons of CO2 equivalents (CO2e) from being released into the atmosphere by 2030, or the equivalent to taking 32m cars off the road per year.
  • With more than 80% of Starbucks’ GHG emissions attributable to energy for use in their stores, offices, and manufacturing plants, the company is increasingly focusing their efforts on energy conservation and the purchase of renewable energy”.

And the winners? Here’s the Barclays take, and the table below identifies some privately held companies in the animal feed and tech space that could make huge strides:

“Feed ingredient companies like DSM, food producers like TSN and JBS and restaurant chains like MCD, SBUX and YUM! play a critical role in delivering solutions and advocating consumers’ concerns: DSM stands to benefit from efforts by the agricultural sector to reduce GHG emissions. Its Clean Cow methane inhibitor can be a >USD1bn blockbuster on our estimates, while large food producers and restaurant chains, given their bargaining power, can be powerful brokers to employ better feeding practices. This offers upside as they may benefit from better pricing and growing demand for green products.”