Five a week

A weekly digest of key developments impacting investments in the sustainable and resilient future of food, agriculture and forestry.

Where’s the catch? - While the food and agriculture sector broadly welcomed this week’s re-set of UK-EU relations, the deal was more problematic for Britain’s fishing industry, both in terms of financial and ecological sustainability. A key plank of the pact announced by UK prime minister Keir Starmer and European Commission (EC) president Ursula von der Leyen on Monday was the removal of border checks for food products, which was seen as a particular boon for exports of meat, dairy and other fresh produce (including seafood). Agreement to work toward the removal of post-Brexit checks and certificates is probably the easiest way to increase demand for UK agricultural products without comprising on quality and sustainability – given the broad existing standards alignment. But the win came at the cost of a 12-year extension of fishing arrangements effectively setting in stone existing access rights until 2038. This came as a shock to the UK fishing industry, which had been pushing for an annual renegotiation, but now must live with a deal whereby EU vessels can fish in UK waters – so long as they transfer 25% of their quota - to UK fleets. It also bakes in overfishing, according to the Blue Marine Foundation. The extended arrangement means allowable catches for the UK fleet exceed scientific advice by 54%, the charity said, pointing out that persistent overfishing of mackerel had seen stock plunge from 7.3 million tonnes to 2.8 million tonnes over the past decade. The new UK-EU deal did, however, offer the prospect of accelerated and coordinated progress on decarbonisation through the reconnection of emissions trading systems – which could markedly reduce transaction costs – and the waiving of border taxes on carbon-intensive products.

In our hands – Scientists warned of a tipping point in the fight against deforestation after new data revealed that fire was the largest contributor to record highs last year. For more than two decades to 2023, forest clearing – largely for agricultural purposes - was the largest driver of tropical primary forest loss, but wildfire was responsible for almost half of losses in 2024, the hottest year on record, according to data from the University of Maryland. A total of 6.7 million hectares of primary rainforest was lost, causing 3.1 gigatonnes of greenhouse gas (GHG) emissions, as fires burned five times more trees than in 2023. While fires in tropical forests are typically caused by humans, a period of extreme drought – fuelled by climate change and the warming El Niňo weather pattern - contributed significantly to the extent of blazes in Brazil and other countries bordering Amazonia. "Now we have this new amplifying effect, which is a real climate change feedback loop,” said Rod Taylor, global director at the World Resources Institute (WRI), which published the data in its Global Forest Watch platform. At root however, deforestation remains a man-made problem: it is more profitable to destroy nature – largely to take more space to feed ourselves - than to conserve it. Deforestation rates had stabilised in Brazil, helped by policies implemented since President Luiz Inácio Lula da Silva returned to power, but state-level decisions have weakened historic moratoriums. In contrast, Indonesia has had more consistent policies over the past decade which, according to the WRI, combined community-level fire suppression with efforts to reduce deforestation linked to commodities, resulting in an 11% reduction in primary forest loss in 2024. COP30 in Brazil later this year will provide an opportunity for governments to compare notes and to address the key issue of making conservation pay. Here, the level of activity and innovation is encouraging, in terms of the thriving ecosystem of market participants that are developing projects and frameworks that attract finance and deliver results on the ground. Only this week, United Nations Climate Change adopted long-awaited rules for measuring the emissions reduction impacts of carbon credit projects which, along with other decisions, should accelerate the pipeline of new projects with benefits to climate, nature and local communities. Another interesting sign came from widespread support for a new French initiative – the Ecosystem Restoration Standard – which use satellite data for continuous project assessment and monitoring to ensure transparency and reliability.

Emissions on the menu – Much of the responsibility for Amazonian deforestation has been laid at the door of the meat industry, with land being cleared to make room for cattle production and growing soy, much of which is then turned into animal feed. So, what are the big beasts of the animal protein sector doing about it? In the case of McDonald’s – which sells almost 6.5 million burgers a day worldwide – the answer could be clearer. This week the fast-food giant was asked by shareholders to provide more detail on how it expects to meet its commitments to reduce Scope 3 GHG emissions – meaning those that arise from activities along its supply chain – by half by 2030, reaching net zero by 2050. In a resolution that McDonald’s initially sought to exclude, Boston-based asset manager Green Century pointed out that beef accounts for a third of McDonald’s total GHG emissions, adding that two of its major suppliers – Brazil-based JBS and Arkansas-headquartered Tyson Foods – both face legal action over misleading climate-related claims, suggesting the restaurant franchise firm’s ability to meet its targets might be compromised. In directing shareholders to vote against, McDonald’s pointed to efforts outlined in its Climate Resiliency Summary – which include the development of a deforestation-free beef procurement policy and a requirement for suppliers to submit science-based targets for validation by the end of 2024. While this is laudable, the firm also took a compliance-focused stance to the resolution, saying information it was preparing for upcoming mandatory climate reporting meant adoption was “unnecessary, duplicative, and would not provide meaningful benefit” to shareholders (for the record, a separate resolution asking for a report on the impact of its operations and supply chain on biodiversity was withdrawn after the firm reached a compromise with filer BNP Paribas Asset Management). Nevertheless, UK-based pensions savers took a different view, with 61% telling provider PensionBee they would support the resolution given the opportunity. For now, the views of other US-based asset managers are more likely to have way, which is likely good news for McDonald’s, given the four largest backed only 7% of environmental and social resolutions tracked last year by responsible investment charity ShareAction last year. Further, the firm gave 16 US-based asset managers an ‘E’ ranking this week in its latest responsible investment annual benchmark.

No drought of data - The extent of European farmers’ financial exposure to climate-induced extreme weather was laid out for the first time in a report launched this week by the EC, European Investment Bank and insurance group Howden. Current estimated annual average losses stand at €28.4 billion – or 6% of crop and livestock production – with drought the biggest single threat (as noted here last week), accounting for around half of agricultural climate risk. The study claims that average annual losses for the sector could rise above €46 billion a year by 2050 if emissions levels stay on today’s trajectory, or €40 billion if policies force emissions to dip by mid-century. The estimated ‘probable maximum loss’ for European agriculture in a catastrophic year (which has a 2% annual probability) is currently €57.5 billion, potentially rising to more than €90 billion by 2050. With 20-30% coverage rates for these losses at present, the report calls for the scaling up of insurance and risk management tools, as well as policies to increase practices and investments that build resilience, and greater access for farmers to finance. The project also identified the need to enhance the collection and assimilation of crop, climate and yield data across the EU “to support greater understanding and management of risks”. While data improvements can boost risk modelling and strategic planning, helping farmers to identify optimal crop varieties, they can also offer vital support in the shorter term. AI-enabled weather forecasting at research institutes such as the European Centre for Medium-Range Weather Forecasts are using machine learning to increase the accuracy of forecasts from days to weeks and beyond. While many are rightly concerned about the hollowing out of the US National and Atmospheric Administration – a vital component of the global climate monitoring architecture – the broader weather data picture is bright, with ‘end-to-end’ models using raw observations from satellites and sensors to bring greater accuracy to more regions, with other innovations offering ‘hyperlocal’ temperature predictions. The EC report flags the increased frost risk to fruit and vegetables arising from earlier budding due to climate change, but this could be offset by greater certainty and precision giving farmers vital time to respond to cold snaps.

A battle of words – Lobbying by the food industry was blamed this week for a further dilution of government plans to increase the healthiness and nutritional value of the UK diet. A ban on pre-watershed TV advertising for products with high levels of fat, salt or sugar will not come into law until next January, to accommodate a shift in policy that exempts ‘brand advertising’ by firms associated with unhealthy foods. Opposition from food manufacturers and retailers was bolstered by broadcasters worried about advertising revenues, reports suggest. The change is the latest resulting from an extensive campaign against tougher rules on junk food – first mooted, then delayed under Rishi Sunak’s premiership. Official guidance encouraging retailers to increase promotions of “minimally processed and nutritious” foods was watered down to refer only to “healthier options”, following pressure from the Food and Drink Federation. This might seem a small tweak, but the latter can be interpreted as including many ultra-processed foods – including pizza, burgers, energy drinks and crisps. Last Saturday, The Guardian published details obtained by the Soil Association of a persistent harrying of Department of Health and Social Care officials to remove references to minimally processed foods. This is just one of many battlegrounds in the fight for better nutrition in the UK, which is centred on a proposed national food strategy. Campaigners and investors are calling for the plan to include mandatory health and sustainability reporting by firms in line with the recommendations of the independent national food strategy released in 2021. Standards requiring disclosure of nutritional value and environmental impact should reduce the scope for greenwashing by food producers and retailers, they argue. The fight is also a global one, with governments and businesses being urged to sign up to the Paris Declaration on Business and Nutrition 2030, which sets out a plan for food systems transformation on the path to a ‘nutrition economy’ by 2030.