Investor network calls for end to subsidies for red meat production

The Group of Twenty (G20) is the premier forum for international economic co-operation, and includes China, France, Germany, Russia, the UK, the USA and the EU.

Red meat has been targeted by a $70 trillion investor network, which wants developed countries to phase out or repurpose by 2030 agricultural subsidies which it says incentivise over-production and over-consumption of greenhouse gas-intensive foods.

The FAIRR network works with institutional investors on environmental, social, and corporate governance aspects linked to intensive livestock and fish farming.

FAIRR, which claims to be the world's fastest growing investor network in assets under management, says subsidy reform is essential for its members with a long-term investment horizon, because climate change and biodiversity loss represent systemic risks to their portfolios.

Supported by 32 of their investors representing $7.3 trillion in combined assets, including Legal & General Investment Management and BNP Paribas, FAIRR calls for agricultural subsidies to be aligned with government, multilateral, and private sector commitments to transition to net zero, and protect and restore nature, by 2050.

They have signed a statement calling on G20 finance ministers to align agricultural support with climate and nature goals by 2030. 

The Group of Twenty (G20) is the premier forum for international economic co-operation, and includes China, France, Germany, Russia, the UK, the USA and the EU.

FAIRR says subsidies and other incentives make up around 15% of total agricultural production value globally with, for example, livestock receiving nearly 20% of EU agricultural subsidies, despite accounting for 50% of EU agricultural emissions.

FAIRR says the United Nations identified almost $470 billion of annual subsidies that are price distorting and environmentally and socially harmful, representing 87% of all agricultural subsidies worldwide. Subsidy regimes are estimated to drive $4-6tn of economic costs per year, through damage to nature, according to FAIRR.

It says the EU’s Common Agricultural Policy, for example, receives a third of the entire EU budget. "Yet the European Court of Auditors has found little progress on reducing emissions, which haven’t changed significantly since 2010, despite €100 billion being attributed specifically to climate mitigation and adaptation".

The statement calls for G20 finance ministers to link financial support with environmental obligations; shift incentives from climate and nature damaging agricultural products to those that put a value on sustainable agriculture; shift away from production of high-emission products like dairy or red meat; and increase just transition funding for workers who lose out if high-emissions sectors are impacted.

Jeremy Coller, Founder, FAIRR Initiative, said, “Globally, governments are setting bold climate and nature goals, but in the same breath are undermining those ambitions with almost $500 billion in harmful agricultural subsidies or high-emitting commodities such as red meat.

“It’s time for the G20 to listen to investors’ call to support a sustainable food industry and offer reassurance that governments' left hand knows what the right hand is doing. We need to realign subsidies to nature goals to support a transition for farmers and to ensure a level regulatory playing field for alternative proteins and other sustainable solutions."

Dr Helena Wright, Policy Director, FAIRR, said, “Governments are subsidising a broken food system which is the primary driver of biodiversity loss globally. Given that an estimated $44 trillion of economic value relies on natural services like pollination and fresh water, this presents an enormous material risk to the value of long-term investment portfolios".

Rachel Crossley, Head of Stewardship, Europe, BNP Paribas Asset Management, said: “Climate change and nature loss are having substantial negative impacts on the real economy, and present systemic risks to the capital markets. 

"The food system is responsible for more than a third of global greenhouse gas emissions, and is the leading threat to 86% of species at risk of extinction. Countries’ agricultural subsidy regimes have been found to drive many of these impacts.

“As a major asset manager, investing across the global food system, and committed to addressing climate change and nature loss through stewardship and engagement, we urge the G20 to implement wholesale reforms to current regimes and to repurpose subsidies to facilitate the delivery of global climate and biodiversity commitments. This will help to protect both the future of our planet and the financial security of our clients.” 

Alexander Burr, ESG policy lead at Legal & General Investment Management (LGIM), said: “As a major long-term investor with global coverage, we engage with policymakers to help them identify and address emerging risks, so they can take transformative steps to tackle systemic market issues and accelerate progress against complex global sustainability challenges.

“It is clear that we must work together to rapidly accelerate action if we are to meet the global commitments on nature and climate by 2030 and 2050.

 There is a real opportunity for governments worldwide to transform their vast, environmentally harmful, agricultural support programmes in a manner that supports a just transition to net zero and the restoration of nature.” 

In 2021, FAIRR was part of an alliance calling the EU’s CAP reforms to include reduced direct support for high-emitting commodities such as beef and dairy.

The investor network says, "We cannot hope to achieve the decarbonisation goals of the 2015 Paris Agreement without substantial changes to the food industry, as it is one of the most carbon-intensive sectors of the global economy. The industry is also the biggest driver of biodiversity loss globally."

It says public subsidies incentivise damaging activities such as habitat destruction, as more land is converted for monocrops and intensive animal farming. It says intensive livestock production is a large source of pollution, generating 3.12 billion tonnes of waste as manure annually, exceeding all other major forms of waste.

FAIRR welcomed global leaders agreeing at the UN Biodiversity Conference in Montreal last year to identify by 2025, and eliminate, phase out, or reform, incentives worth at least $500 billion per year by 2030, including subsidies harmful for biodiversity.