Food for thought: Plant-based protein investments have ‘biggest impact’ on decarbonisation

Investments in plant-based alternatives to meat generate higher CO2-equivalent savings per dollar invested than any other sector, according to a new report by Boston Consulting Group and Blue Horizon

The Food for Thought report from the Boston Consulting Group and impact investor Blue Horizon, found that investment in plant-based proteins as an alternative to meat has one of the highest impacts on climate “when assessed in terms of the market value of avoided CO2 equivalent emissions per dollar invested in mitigation efforts”.  

The report’s authors call this ‘impact of capital employed’ (IoCE) and say that alternative proteins produce IoCE that is much greater than investment in other sectors of the economy.  

The report found that the IoCE from investment in plant-based proteins was three times greater than in sustainable cement, more than seven times greater than in sustainable buildings and 15 times greater than in the sustainable energy sector.   

Nonetheless, spokesperson for Blue Horizon Marc Duckeck was keen to highlight that greater investment into all sectors was needed: “It’s not about green power versus alternative protein. We will need to do all of this and more to ensure humanity’s future on this planet. Sustainable food systems are just a particularly low-hanging fruit, not least because they have been relatively underinvested compared to more obvious green investments into power and transport.” 

According to the report, the food system accounts for 26% of current global greenhouse gas emissions, of which animal agriculture is the largest emitter, responsible for 15% of global emissions, and yet “investment in sustainable foods is only a fraction of that committed to other sectors”. 

But investment and consumer adoption of alternative proteins is ramping up. Using current forecast models, the report’s authors say that alternative proteins will represent 11% of all protein consumption by 2035, reducing CO2 equivalent emissions by 0.85 of a gigaton (Gt) by 2030, equal to decarbonizing 95% of the aviation industry and about 22% of the building industry.  

And with even greater investment, advances in technology and better regulation, they believe alternative proteins’ share of the market could increase to as much as 22% by 2035, representing a reduction of 2.2 Gt in CO2 equivalent emissions by 2030. This is equivalent to about 4% of emissions by 2030 under the UN’s current policies scenario based on existing climate pledges.  

Bjoern Witte, CEO of Blue Horizon, added: “This is the second report from BCG and Blue Horizon confirming that protein transformation is the most capital-efficient way to avoid emissions and deliver Impact of Capital Employed. If we reach 11% market penetration by 2035, which is our goal, we could save more carbon emissions than decarbonizing 95% of the aviation sector. The positive impact is absolutely massive, and secular drivers have never been stronger—the time to invest is now.” 

Investors jumping on board 

The report highlights figures from the Good Food Institute, which show that venture capital investment into alternative proteins increased at an annual rate of 124% from $1bn in 2019 to $5bn in 2021. Over the same time period, investment in fermentation-based companies increased by more than 137%, from $300m to $1.7bn, and in animal-cell-based companies by more than 425%, from $50m to $1.4bn.  

More traditional food companies are also starting to invest in alternative proteins with corporations cited as participating in 60% of funding rounds in 2020. 

Continued advances in technology which are helping to bring new products to market, falling costs and the gradual build-up in regulation are also helping to push the industry forward.  

Taste, health and price key to driving consumer demand 

The report also included a survey of more than 3,700 consumers across seven countries which found that for 75% of respondents, having a healthier diet was the number one reason to move to alternative proteins. Taste and price were also highlighted as important, with none of the respondents willing to pay a price premium at taste parity with conventional animal proteins. And almost a third of consumers said that climate would be a primary reason for switching their diet to alternative proteins.   

Responding to Impact Investor about what was needed to accelerate the move to alternative proteins, Marie Asano, partner at the European Circular Bioeconomy Fund (ECBF), said that greater support of differentiating technological innovation in the nutrition space was key to enabling the development of a new generation of great tasting and healthier products. She added: “Plant-based alternative products must also be affordable with the right nutritional content, so that they can reach the maximum number of people as a true alternative to meat and not only those that can afford it.”   

She gave the example of ECBF portfolio company Prolupin, which transforms lupin protein into alternative dairy products like yoghurts, milk, spreads and ice cream. “The company is an attractive investment proposition. On one hand, it gives consumers a direct alternative to dairy products and thus animal agriculture, as well as being a regional alternative to soy which needs to be imported into Europe. On the other hand, the crop is a win-win for farmers as well. Lupins naturally contribute to soil improvement and improve marginal agricultural land while creating an additional revenue stream for farmers as an intermediary crop.” 

New fund to invest in plant-and-fermentation-based products 

The report coincides with the launch of a new £30m (€35m) fund from Sentient Ventures which is focused on companies developing plant-and-fermentation-based products, ingredients and technologies to replace animal products.  

The team behind the fund want to enable the removal of animals from the supply chain to address the multiple crises of biodiversity loss, species extinction, water pollution and shortages, antimicrobial resistance, the spread of food borne and zoonotic diseases, and the climate emergency, of which animal agriculture is highlighted as a major driver. They are also driven by ending the suffering of farmed animals in the food production system.  

The fund will target a 3-5x MOIC by investing in early-growth stage companies that can demonstrate proof-of-concept and are ready to scale-up production to reach new consumers and markets. Each investment will be assessed using an in-house proprietary impact assessment tool, that uses metrics such as animal lives spared, days of suffering reduced and the reduction in greenhouse gas emissions, land use and water. 

Speaking to Impact Investor, Alexandra Clark, one of Sentient Ventures’ three founders, said the BCG and Blue Horizon report was an important reminder for investors of the significant climate impact of animal agriculture, which she said was a fact which was routinely ignored in the public debate.  

She added: “Raising animals for food not only contributes to the climate emergency at an emissions level, but further, the grazing of farmed animals and production of feed is a leading cause of deforestation, destroying carbon sinks which sequester and store carbon from the atmosphere. Investors looking to invest in the net zero agenda should also be thinking about nature restoration, as farmland currently dominates and depletes our landscapes.”  

She said given that alternative proteins required considerably less land and other resources, and emitted a fraction of the greenhouse gas emissions, they were “the closest thing we have to a panacea or silver bullet to address the serious environmental crises we are currently facing.” 

“What is more, the space is booming right now with the development of technologies such as precision fermentation that will shape the future of protein. Rather than being overlooked, alternative proteins should be at the forefront of all environmental impact investors’ portfolios,” she added.