Consumer interest in clean and sustainable diets continues to focus on a broad range of issues including food waste, air miles, clean labels, meat free, lab grown meat and organic, among others.
Veganism is one such diet and lifestyle choice that is increasingly becoming mainstream, and the rise of flexitarian and vegan diets was highlighted by the 500,000 people who signed up to the Veganuary challenge - twice the number who pledged to go vegan for January in 2019.
Veganism can tie in perfectly with governments' plans to reduce carbon emissions, with less meat consumption meaning lower emissions at a national level.
Access a problem
However, while it is a growing trend for consumers, investing in it is far from straight forward.
One of the main problems is a lack of pure play companies in the space. For example, there are only a few vegan-only, direct to consumer companies entering the market, and mainstream supermarkets are gaining traction in the sector at the point of sale with their own-brand vegan meals.
Investors could start with the supermarkets to gain exposure to the veganism trend, but the impact of vegan food sales on supermarkets' bottom lines is currently so minute that to class them as vegan stocks would be a gross exaggeration.
Nonetheless, there are other options available for investors to explore.
Sustainable food stocks
It's important when investing in any trend not to be too constricted in one's approach, and this certainly rings true with veganism and, more broadly, food sustainability.
The good news is that, although there are few pure play vegan names in listed global equity markets, there are other ways to eat more sustainably and many companies are busy making a positive difference to the outlook for not only food stocks, but also the environment.
One name we like is DSM, which operates in the food ingredients market. DSM is working to produce alternative food sources for fish farms, which currently rely on a type of protein called fry to feed them.
DSM uses algae instead of fry to provide better nutrient delivery for their stocks of fish, and this is helping to make fish farms more sustainable going forward.
Precision agriculture is another area to look to for companies making a real difference in the delivery of food, and one name here which is making strides forward is John Deere, the famous farming machinery business.
The US company has developed its business extensively in the last decade, and it is its use of technology and data analysis which stands to make a real difference to food production going forward.
Deere is using an open architecture platform to allow its customers to analyse, to a very granular level, how their fields are performing, what methods (and chemicals) are being used across different fields, and then share this data with customers so they can say with increasing certainty exactly what is in the food they produce.
Finally, there is also the trend to increase yields from animals themselves. Scientific progress means breeding modifications to livestock can improve the quality and quantity of the meat that is produced, for example.
One business at the forefront of this is UK-listed Genus, which is pioneering animal genetics to help create more efficient breeding programs for farmers.
Again, this has the knock-on effect of lowering the environmental impact of meat production, and this is important because, while more and more people are making the choice to go meat-free, many will opt to keep eating meat.
Long-term trend
More and more governments and corporates are placing lower emissions at the heart of their policies and company charters, and this decade is shaping up to be a pivotal one for action on climate change.
The food we consume has a huge, long-term impact on this. According to one report, meat and dairy production are on track to overtake the fossil fuel industry as the biggest contributor to global warming in the coming years.
Non-profit organisations such as the Institute for Agriculture and Trade Policy and GRAIN claim it will account for 80% of the allowable global greenhouse gas budget by 2050.
With this kind of dynamic in the background, it is clear that this is a global problem which requires global solutions, and companies which can deliver them are likely to be inundated with demand.
The key is to be discerning. Not all sustainably-focused businesses will deliver the desired returns over the long-term, so being stock-specific when it comes to investing in this trend is vital.
What is not in dispute is the need for solutions to these very real problems, and we expect this theme to become more prevalent in investors' portfolios over the coming years.
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