Most people wouldn’t be able to find Stavanger on the map. In that case, nor would they associate this small city on the western seaboard of Norway with global sustainable food production.
Yet it’s here where a seafood producer focuses on sustainability while guarding against threats and risks through strong governance, well-defined internal processes and technological innovation.
A few hundred kilometres north, in the larger city of Bergen, another Norwegian seafood company sees its low environmental impact and the welfare of fish as both an ethical responsibility and key to its drive for profitability.
Both companies are focused on aquaculture, the breeding of fish rather than the exploitation of wild stocks. And both are market leaders in their ESG practices, according to FAIRR (Farm Animal Investment Risk and Return), an investor network that raises awareness of the ESG risks associated with intensive food production.
In our paper, we show that aquaculture could be a crucial pillar of food production in the future, especially in emerging markets.
Aquaculture companies don’t face the same reputational issues as, say, meat and dairy producers. As of 2019 most major meat and livestock firms still lacked targets for cutting greenhouse gas (GHG) emissions, said FAIRR. Beef and lamb production could account for half of all agricultural GHG emissions but just 3% of caloric intake by 2050, according to Sweden’s Chalmers University of Technology1. To achieve the goals set out in the Paris Agreement, reducing meat and dairy consumption will be “indispensable”, the study added.
Beyond climate change, other risks relating to factory-farmed livestock include the overuse of growth-enhancing antibiotics. This has made slaughterhouses breeding grounds for highly resistant pathogens that can be passed from animals to humans. And the Covid-19 pandemic has highlighted the dangers of “zoonotic” diseases.
Although aquaculture offers an instructive snapshot of how innovation in food production and consumption generates opportunities, in our paper we also highlight potential threats.
Aquaculture might in some ways be thought of as an intensive means of production, and there have been numerous cases of ESG failings. These include damage to marine life, disease outbreaks, mislabelling and allegations of the use of slave labour. In general, however, aquaculture has shown a willingness to acknowledge and correct its errors.
As our knowledge expands and attitudes shift, other innovations and changes are expected in the food sector. Sales of plant-based protein alternatives are already skyrocketing. The worldwide market, worth $10.3 billion in 2020, is projected to hit $14.5 billion in 20252. And greater interest in both veganism and vegetarianism has been accompanied by a rapid growth in meat substitutes.
Source: Vomad: The 2019 Global Vegan Survey, 2019; findings based on survey of almost 13,000 vegans worldwide.
Yet the seafood producer in Stavanger faces challenges too. Algae blooms and diseases stemming from fish lice are mounting concerns – not to mention the impact of climate change.
The company might not be able to avoid related losses altogether, but the point is that it is determined to try to minimise them through effective ESG management – including the use of underwater cameras to constantly monitor feeding and net integrity, thereby reducing waste and preventing escapes and contamination. Similar is true of the Bergen-based producer, which uses antibiotics as a last resort, prompting praise from FAIRR for its efforts to maintain fish health and for its “antibiotic stewardship” and focus on vaccinations.
We believe that these case studies underscore the opportunities and risks related to food production. It is obvious that ESG factors constitute financially material risks for aquaculture companies and their stakeholders. It is also obvious, we say, that many of these risks can be managed in a sector that will clearly have an enormous role in reshaping food production and consumption for the better.
Appetite for Change Part II: The search for sustainability
In this paper, drawing on pioneering research and real-world examples, we take a closer look at the status quo and how the investment community is helping make a difference. Find out more.
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1See Hedenus, F, Wirsenius, S, and Johansson, D: The Importance of Reduced Meat and Dairy Consumption for Meeting Stringent Climate-Change Targets, 2014.
2Source: https://www.marketsandmarkets.com/Market-Reports/plant-based-protein-market-14715651.html
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