While environmental, social and governance (ESG) integration in Asia was still in its relative infancy two years ago, the Covid-19 pandemic has increased ESG investments. Forum's Senior Strategists Cynthia Morel and Madhumitha Ardhanari demonstrate through the protein system that while the push for ESG metrics is a step in the right direction, it falls short of enabling the deep transformations needed to build a just and resilient future.

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Recent deliberations over the international climate agreement and global emissions caps have raised awareness of climate change risks. While fossil fuels and renewable energy have dominated the headlines, the extent of ESG investments is wide-ranging.

The food system is a critical base that can shape the region’s climate trajectory. Using the case study of the protein system from the Forum for the Future’s Protein Challenge Southeast Asia project, it can be seen that there are potential blind spots in the ESG investment trend and the role of financial actors in shaping climate action.

The protein system

The “protein system” encompasses actors, industries, resources and processes working to deliver the world’s protein needs. Historically, dairy, poultry and beef sectors were considered as separate; yet they all contribute to the same human nutritional need of protein sustenance.

Research suggests it will be impossible to grow the animal-based protein supply to match future demand and keep within the Paris Agreement emission targets using today’s production systems. According to the UN’s Food and Agriculture Organization, global livestock production alone contributes to 14.5 per cent of greenhouse gas emissions. Moreover, if livestock production continues to grow on its expected trajectory, cumulative emissions between now and 2050 could be equivalent to one-third of the total remaining 1.5 degrees Celsius carbon budget.

If we are to remain on this trajectory for global warming, current production and consumption habits will need to change. This is particularly urgent in Asia as markets shift towards a higher per capita consumption of meat and seafood, with corresponding greenhouse gas emissions forecast to grow almost 90 per cent between 2017 and 2050.

Central to whether present and future populations are adequately fed, depends on the actions taken today to shape a sustainable protein system that genuinely addresses underlying risks and vulnerabilities. We cannot afford to get this wrong.

Investment in alternative proteins is growing exponentially

Increasingly, animal protein producers are engaging more deeply with questions of how to improve the sustainability of production. Policymakers are exploring new economic opportunities for protein production and innovation. And innovators are developing new plant-based options that mimic meat, as technology startups roll out cell-based meat options. Much of these considerations are driven by the rise of ESG.

The region’s potential for disruptive change cannot be overstated. Southeast Asia has seen a 440 per cent increase in vegan and vegetarian plant-based product launches since 2016, albeit from a low base. Given their steep pricing, these may not be entering mainstream diets, but their potential to disrupt livelihoods within the traditional protein system is significant – particularly for smallholder businesses.

While there is more attention, commitment and innovation around alternative protein, the key question is the level of transformation being delivered. Are these actions operating in silos or adopting a holistic view of impacts across the value chain? To what extent do alternatives support the goal of affordable nutrition? Do these alternatives leverage the potential of local crops and traditional knowledge systems? In short, is current innovation in alternative protein supporting a deep transformation of the protein system?

Investing in a new protein system

For sure, investment in alternative proteins in Southeast Asia will be one of the solutions to addressing the protein challenge. The need to reduce greenhouse gas emissions related to livestock, mitigate the risk of zoonotic diseases, and address climate change will impact the security of food supply.

However, to enable transformation, we need to broaden the scope of delivering future-fit food systems. A crucial starting point is for ESG investment to tackle a wider range of impacts related to protein production and consumption. These include:

1. Social inequities: The current emphasis on farm consolidation compounds problems facing smallholder producers. A drive to produce enough protein should consider the access afforded to local populations and the unlocking of human capital. The livestock and fishing sectors have been tainted with allegations of human trafficking and forced labour, as well as antibiotic use for livestock, risking the emergence and spread of antibiotic resistance among humans. Southeast Asia is a region that still suffers fundamental nutritional deficiencies and food poverty, in that affordability of healthy food remains out of reach for many.
2. Ecological fragility: Focusing on decoupling protein production from environmental impact and sparing land from agricultural expansion is insufficient to enable more regenerative forms of agriculture that exist in balance with nature. Deforestation and overfishing are driving the loss of natural ecosystems in a region that is an important biodiversity hotspot, with 64 per cent of the region’s fisheries at medium-to-high risk of overfishing.
3. Adaptability: A strong preference for specific solutions or protein types risks overlooking a diversity of approaches that may be critical for resilience in the face of critical uncertainties.

A futures approach to present challenges

One approach to the complex environmental issues that addresses these dynamics is a futures approach. This means going beyond the narrow focus of primarily mitigating the environmental impacts of production to enabling the growth of systems that can operate in balance with nature and that address the underlying drivers and vulnerabilities.

Some potential future threats include rice harvest failures in the Mekong Delta, coral reef collapses and a global water crisis from drought and dwindling aquifers, for example.

Funders, entrepreneurs, non-governmental organisations, civil society, policymakers – those who contribute to the protein system in different ways – have an opportunity to think about solutions differently and reinvent how the protein system works regionally.

Reinventing how the world works

Protein is just one critical challenge sitting at the intersection of our global climate, public health and food security crises. Governments, businesses and communities have to work together to tackle these immense problems. The pandemic has offered a glimpse of what a climate-constrained world (where critical social and environmental thresholds are hit) might look like.

Traditional ESG measures are falling short of solving intractable, complex and wicked problems because the current framework is limited to engaging with – and reacting to – today’s challenges when solutions must in fact be future-fit.

Taking a futures approach has far-reaching implications for every major social and environmental challenge in the region. Fossil fuel pollution, extreme weather events, the water crisis and more will benefit from understanding wider systemic disruptions and dynamic areas for positive change to then imagine what a just and regenerative future might look like.

If we fail to take a holistic and long-term approach to these immense challenges, we run the risk of achieving a shallow transition that extends the same problems we are already facing while creating new ones. Just and regenerative systems will enable us to act at the roots of our challenges and secure our future together.

This article first appeared in the Q1 2022 issue of the SID Directors Bulletin published by the Singapore Institute of Directors.

Authors: Cynthia Morel; Madhumitha Ardhanari