Moo! Boo Hoo! Investments In Global Livestock Are Falling Due To Climate Change

Global livestock investments are declining due to the climate crisis. Widespread deterioration of ecosystems and the planet’s declining ability to adapt to these impacts are being felt across all regions. Adverse climate change impacts on agriculture and crop production, including species loss and mass mortality events, some of which are irreversible, have already occurred.

Livestock is projected to face additional and more severe heat stress as the world gets warmer.

Livestock is the main source of agricultural greenhouse gas emissions through enteric fermentation, as well as manure storage and deposition on pasture. The global meat and dairy industry is confronting a difficult truth: harsh climate impacts are signal to investors that Big Agriculture may become a deciding economic target area. Data synthesized from IPCC reports in a recent briefing paper from the FARR network, which represents investors with $52 trillion of assets under management, indicates that significant problems exist in long-term sustainability of animal-based agriculture in its current form.

Why Climate Change is Affecting Global Livestock

Why is climate change affecting global livestock? The IPCC warns that as temperatures rise, on average animals eat 3 to 5% less per additional degree of warming, harming their productivity and fertility.

Why is heat a stress factor for global livestock? Climate change has already affected livestock production, both directly through heat stress affecting animal mortality and productivity and indirectly through effects on grassland, species distribution, and diseases.

What effects are already being seen? Cattle numbers in Nepal have already declined, attributed to increases in the number of hot days, while milk production in West Africa and China has also stagnated and may increased be attributable to periods of high daily temperatures.

The IPCC Reports & Conclusions about Effects on Global Livestock

How were these projections made? The Intergovernmental Panel on Climate Change published its Working Group II (WGII) report on climate change, “Impacts, Adaptation and Vulnerability.” The report highlights key risks and disruptions caused by climate change, like floods, droughts, heatwaves, and biodiversity loss and how these disruptions will increase with further temperature changes. The disruptions have particular impacts on agriculture — including livestock systems — with potential material consequences for companies and investors.

What will happen to the land area currently used for cultivation? The Working Group II report cites projects that 10% of the land area that is currently used for cultivation of major crops and livestock will be unsuitable by mid-century. These adverse effects of climate change on food production will be even more severe in scenarios exceeding 2°C in global temperature rise.

What are the worst case scenarios for global livestock? Under the most extreme of the IPCC’s scenarios, consistent with around 4.3˚C in temperature rise, one-third of global food production could be pushed beyond the Safe Climatic Space by 2081-2100.

Economic Losses for Global Livestock Investors

Will agriculture become another area in which stranded assets become common? Physical risks of climate change could create the risk of stranded assets for investors — those assets that at some time prior to the end of their economic life are no longer able to earn an economic return.

What adverse socioeconomic consequences of climate change have already taken place in the global livestock sector? Between 1961 and 2006, yield losses due to droughts and changes in precipitation and droughts were estimated at 25%.

What is the big picture of economic losses in global livestock due to climate change? At just 2°C of warming, livestock numbers will decrease by 7% to 10% by 2050, resulting in $10 billion to $13 billion in economic losses. Changes in precipitation rates in Brazil, for example, are projected to result in annual losses of up to $155 million.

How transparent are the most affected countries to investors? Just 7 out of 60 companies analyzed in the Coller FARR Climate Risk Tool have reported climate-related financial impacts.

Ecosystems & Climate Change

What will global agricultural regions look like by 2100? At the higher end of temperature increase projections, up to 34% of existing areas for crops and livestock production will be unsuitable by the end of the century.

What about water? A warming world strains water supplies. Including animal feed production, livestock accounts for 30% of all water use in agriculture. Cattle are projected to consume 13% more water under 2.7°C warming while, at the same time, water supplies will be scarcer — potentially conflicting with direct human water use. High-input livestock systems may also consume more water than grazing or mixed systems.

Will global livestock be more vulnerable to diseases due to climate change? The IPCC notes that zoonotic diseases — illnesses that can jump between humans and animals — are more sensitive to climate change than human or animal-only pathogens. The ranges of disease-carrying insects and other arthropods will expand as the climate warms, while more extreme weather events resulting from climate change will also increase the spread of disease.

What is an example of the affect of climate change on global livestock today? Tyson Foods’ US operating income decreased $410 million year-on-year in the first 9 months of 2021, partly due to severe weather disruptions.

The Regions of Greatest Impact

What areas of the world will be affected most significantly? The Coller FAIRR Climate Risk Tool assesses the financial vulnerability of the 40 largest animal production companies to climate risks in a 2°C scenario and finds that companies with the highest exposure of profitability to climate risk are located in Africa, Asia, and South America.

What’s happening to regions with lots of grasslands? Animal production systems that depend on natural grasslands for food are particularly vulnerable. Climate change has already caused observable negative changes to grasslands in North America, South Asia, and Inner Mongolia.

How will hotter temperatures negatively affect Caribbean livestock? These excessive hot days will be especially harmful to larger livestock — like cattle — in the tropics and subtropics. As an example, even warming of 1.5°C to 2°C will impede the ability of livestock to thermoregulate in the Caribbean and will cause animals to persistently experience heat stress.

How will hotter temperatures negatively affect livestock in the US, UK, and West Africa? These regions are projected to lose up to 17% of milk production by the end of the century.

The Need for Adaptation & Mitigation Strategies for Global Livestock Production

Is there any hope? The latest IPCC Working Group III report released in April focuses on mitigation options, outlining the key role that the agriculture, forestry, and other land use (AFOLU) sector plays in rising greenhouse gas emissions and in potential mitigation.

What is likely to happen without changing the way Big Agriculture works? Without adaptation measures, there will be significant losses to livestock feed crops over the 21st century, including declines of 2.3% per decade for corn and 3.3% per decade for soy. The WGII ​​report suggests that throughout tropical and subtropical regions, beef and dairy production losses could be even worse, resulting in losses up to $9 billion per year for dairy and $31 billion per year for beef by the end of the century — approximately 7% and 20% of the global value of production of these commodities in constant 2005 dollars.

Are any strategies working today to help with adaptation and mitigation? Yes. Specialized breeding, species switching to increased shade, infusing more ventilation, and mixed crop-livestock systems like agroforestry are helping to enhance diversity.

How expensive are adaptations and mitigation strategies, really? The AFOLU sector has a high mitigation potential at a relatively low cost, with the highest potential coming from reduced deforestation in tropical regions.

Where do plant-based alternative proteins fit in? Diversification into sustainable protein production and diets high in plant protein is one way to reduce key risks. Chapter 5 of the IPCC WGII ​​report suggests that alternative protein sources could lead to significant reductions in land use for pastures and crop-based animal feed. Chapter 12 of the WGIII report cites plant-based alternatives and cellular agriculture as possible transformative food system mitigation options with multiple co-benefits for animal welfare, land sparing, lowered risk from zoonotic diseases, pesticides, and antibiotics use. Alternative proteins could amount to 64% of the global protein market by 2060.

Yet big beef producing countries like Argentina, South Africa, and Brazil opposed including a reference to plant-based diets in the IPCC report, with a preference for promoting the adoption of “balanced diets” as a demand side measure.


 


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