The FAIRR analysis puts climate risks in terms corporates can understand – profit. It raises the possibility that many of those most exposed to those risks haven’t articulated how they will deal with them.
Investor consortium FAIRR initiative forecasts half of the world’s 40 largest livestock producers can expect net operating losses by 2030 as the climate crisis impacts their operations. The investor consortium represents over US$70tr in combined assets and made the announcement on the day it launched changes to its climate risk tool. The tool gives investors company level data on how climate risks could impact businesses in the meat and dairy sector.
The forecast is based on a 2oC business as usual scenario which would reduce profit margins by 7% for 40 livestock companies compared to 2020 – a loss of US$23.7bn overall, with 20 of the companies forecast to be operating at a loss by 2030. The fall in profits is driven by an increase in climate-related costs which are expected to rise 9% on average with 5% attributed to higher feed prices and carbon emission taxes contributing 4%. When looking further ahead to 2050, the scenario forecasts sector profits to fall US$38bn compared to 2020 as carbon emissions taxes are expected to surpass feed price rises.
FAIRR said only six of the 40 companies have published climate scenario analysis, considered an effective method of planning effective strategies for climate risk mitigation. FAIRR urged meat and dairy companies to take action to address climate risk as investors start to factor it into their long-term valuations of livestock companies.