A rapid land use transition is coming, which will be just as profound as the energy transition.

• Any chance of limiting warming to 1.5 degrees Celsius requires a transformation of the way land is used for food, fibre, and fuel.

• Forest, land, and agriculture industries contribute 22% of global emissions – the second highest emitting sector after energy.

• That’s 12 times more than the emissions generated from aviation, and fully half of these emissions comes from deforestation and land conversion for commodities humans rely on.

• Put simply, unless we end net deforestation, achieving net zero and a 1.5 degree world is impossible.

• Policy action to avert climate catastrophe and stem unprecedented loss of the natural world is accelerating rapidly as governments and investors join forces.

• 150 countries have signed the Glasgow Leaders’ Declaration on Forests and Land Use to halt and reverse forest loss and land degradation by 2030, and a growing swathe of investors have signed a Commitment on Eliminating Agricultural Commodity-driven Deforestation by 2025 and increasing investment in nature-based solutions. Momentum is accelerating, with profound implications for the food system and the companies at the heart of it.

Transforming today’s unsustainable, inequitable, and vulnerable global food system is critical.

• Our food system is vulnerable. Climate-linked disasters are increasing in frequency and magnitude, causing USD$108 billion in crop and livestock production losses in developing countries between 2008 and 2018.

• Climate change is fuelling food price inflation and shortages with food prices 80% higher in April 2022 than in 2020 as supply chain disruption and commodity prices increased. This threatens to undo decades of progress to eradicate hunger and push nearly 10 million additional people into extreme poverty for every 1% increase in food prices. But nature and land use represent a major blind spot for investors.

• Mainstream climate scenarios used by investors to price risk - such as those developed by the IEA and NGFS - focus on the energy system, overlooking the critical agriculture, forestry, and land use (AFOLU) sectors.

• Deforestation threatens to be the ‘new coal’ in investors’ portfolios, as exposure to companies who drive such continued environmental destruction represent considerable financial, regulatory, and reputational risks. Yet the potential financial impact is accounted for by only a small minority of investors today.

This new first of its kind analysis shines a light on the financial implications of the land use transition.

• To combat this investor blind spot, this analysis presents results of a credible forecast of the accelerating climate and nature transition and the impact it could have on the value of 40 of the world’s largest food and agricultural firms worth over USD$2 trillion.

• It builds on the Inevitable Policy Response’s (IPR) high-confidence, realistic, policy-based scenario. Commissioned by the UN-backed Principles for Responsible Investment, the ‘Forecast Policy Scenario’ uses in-depth analysis of current policy and technology trends to illustrate a likely future with accelerating policy action and is supported by a strategic advisory group of leading investors including BlackRock, BNP Paribas Asset Management and Goldman Sachs Asset Management.

The analysis finds that incoming policy and demand shifts could drive permanent value loss across the critical, but overlooked, food and agriculture sector.

• Individual firms at the centre of the global food supply system could lose up to 26% of their value by 2030, with a sector average hit of over 7%.

• This is equivalent to USD$150 billion in losses to investors and, unlike one-off cyclical shocks, this will be a permanent, non-cyclical loss if investors and companies do not act now to protect value.

• The lasting impact would be comparable in magnitude to value loss following the 2008 financial crisis, where enduring losses in potential output across 19 OECD countries averaged 5.5%.

The analysis reveals significant variations between winners and losers within the sector, and between companies relative to their positioning on nature and climate.