From Pandemic Trends to Permanent Shifts: an Investment Case Study on the Post-Covid Consumer
November 11th, 2021 | Jason Landau
The climate crisis is closing in on us quickly, and at the heart of the climate crisis is consumerism. It is the reason the planet has too much plastic and CO2, losing too many trees, and using more fresh water than the Earth can produce. According to The World Counts, on a global scale we need the same as 1.8 Earths to support our demand for resources and absorb our waste.
If everyone on Earth consumed at the same rate as Western consumers, we would need five Earths to support us. And the number of consumers is growing fast. By 2030, the number of consumers on the planet will be 5.6 billion, compared with 4.3 billion right now. The World Counts defines a consumer as “someone able to buy goods and services beyond the satisfaction of basic needs. Specifically someone having more than US$10 a day to live on – also referred to as middle class.” If nothing changes, we will be out of fresh water, have no more trees, and no more seafood at some point in the next 30 to 80 years.
Writing about anti-consumerism and responsible investing is not easy. Fundamentally, the general premise of investing is buying companies that you think are going to increase sales, by increasing the production of the goods or services they sell. Investing in anti-consumerism sounds like a paradox. So where is the intersection of investing and anti-consumerism? Is there an intersection?
Tech seems like a logical place to start, although the major tech companies can hardly be seen as anti-consumer.
Apple Inc. promotes its goal of being carbon neutral by 2030 and, to its credit, has reduced greenhouse gas emissions every year since 2015, but their primary business is producing and selling phones, tablets, and computers. As a result, they emitted 22.6 million metric tons of greenhouse gases in 2020.
Alphabet Inc. (Google’s parent) and Meta Platforms Inc. (owner of the Facebook social media service) make most of their money from advertising, advertisements that promote consumption, while Amazon.com Inc.’s business relies primarily on consumption. The big tech companies obviously serve a valuable purpose, and there is a place for them in some RI portfolios, but not for promoting anti-consumerism. Most tech funds hold some combination of the mega-cap tech players – if not all of them. Here again, it’s not easy investing with an anti-consumer perspective.
How about food and water companies? Food and water are, first and foremost, basic necessities of human survival, so at the very least food and water companies are providing for human needs as opposed to human wants.
That brings us to companies like Xylem Inc., which focuses on creating “sustainable, efficient, and autonomous water systems” by increasing the use of technology and data analytics. Then there is Halma plc, which brands itself as a “global group of life saving technology companies,” including a group of water analysis and treatment companies. One of these is Hydreka, which produces equipment and software for water optimization and monitoring. Helma (and its subsidiaries, like Hydraka) is a component in the iShares Global Water Index ETF (TSX: CWW), which tracks the S&P Global Water Index, providing “exposure to 50 companies from around the world that are involved in water related businesses.”
In terms of food companies, there are many related to agriculture and fertilizer, but an easy argument can be made that they actually contribute to overconsumption, and it’s a fact that they contribute significant greenhouse gas emissions. A study from the University of Michigan found that 10%-30% of a household’s carbon emissions come from food, and according to the UN’s Food and Agriculture Organization, almost 15% of global greenhouse gas emissions come from animal agriculture – 65% of that is from beef.
What we eat is important in the fight against climate change. Two of the bigger companies that provide meat alternatives are Beyond Meat Inc. and Impossible Foods. Beyond Meat is publicly traded but Impossible Foods is not, so I’ll focus on Beyond Meat here.
The number-one ingredient in Beyond Meat’s “Beyond Burger” product is pea protein, which results in significantly lower GHG emissions to produce than beef. According to Our World in Data, the production of 100 grams of beef protein results in 50 kg of GHG emissions, while 100 grams of pea protein results in 0.44 kg of GHG emissions.
Beyond Meat commissioned the University of Michigan to study the lifecycle of the Beyond Meat Burger and found that “the Beyond Burger generates 90% less greenhouse gas emissions, requires 46% less energy, has >99% less impact on water scarcity and 93% less impact on land use than a ¼ pound of U.S. beef.” The Desjardins SocieTerra Positive Change Fund currently lists Beyond Meat as a holding. Hopefully more get on board once Beyond Meat gets more established.
Investing in anti-consumerism is not easy, but it’s not impossible. As responsible investors, the bottom line is that we need to look at what our investments are producing and how they promote consumerism, or better yet how they don’t promote consumerism.
Contributor Discalimer
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Reid Baker
Vice President of Analytics & Data
Fundata
