A System Ripe for Disruption: Discussing Plant-Based Innovation and Investing with Elysabeth Alfano, VegTech Invest.
To produce protein for the world, there are currently ten times more animals in factory farms than there are people on the planet. This inefficient system negatively impacts water resources, deforestation, climate change, and food security. Elysabeth Alfano, CEO of VegTech Invest, joins the podcast to discuss the exciting technologies and trends disrupting the global good system.
Transcript:
This transcript has been edited for clarity.
Dan Carreno, Ethos ESG
Thank you for joining us. And this is where we break down the latest developments in the world of sustainable and responsible investing. I'm Dan Carreno.
Brittany D'Amico, Ethos ESG
And I'm Brittany D'Amico.
Dan Carreno, Ethos ESG
And we are joined today by a special guest, Elysabeth Alfano, the CEO and co-founder of VegTech Invest. They are the advisor to the VegTech Plant Based Innovation and Climate ETF. How are you today, Elysabeth?
Elysabeth Alfano, VegTech
I'm great. Thanks for having me.
Dan Carreno, Ethos ESG
Fantastic. Elysabeth has an amazing combination of skills that we don't see much in our industry. She comes out of the plant-based food industry, doing a lot of consulting work there, and then also has deep experience as an investor. Elysabeth, I would like to start off and hear about the path that led you to founding VegTech.
Elysabeth Alfano, VegTech
As a consultant to the plant-based industry, which might be a small start-up company or a large multinational, they're looking for white space where they can deploy capital. In working with these clients, I would see the white spaces myself, and as an investor, we see this opportunity where Wall Street wasn't doing anything. We wanted alternative proteins and plant-based innovation for the enormous growth that we see coming. The Boston Consulting Group says that by 2035 alternative protein, plant-based innovation will be 11% of the meat market. That's $290billion. We thought those were numbers that we like. We like the diversity, liquidity, and flexibility of the public markets for this sector. We thought some of the big players would probably do it. And then we realized they're never going to do it because, first of all, you'd have to be mission-aligned, and second of all, you would have to understand the global food supply system. It's deforestation. It's water pollution. It's land and water use. It's climate change. It's food injustice. Our food supply system is ripe for disruption. We haven't changed what we do in thousands of years. And so there's money to be made there. And there's joy to be had there.
Brittany D'Amico, Ethos ESG
I am fully supportive of all of this work that you're doing. I want to dig a little bit deeper. First, plant-based proteins and climate change. The two topics are often correlated, but many folks do not understand how one impacts the other. So, can you provide a little bit more insight on that?
Elysabeth Alfano, VegTech
It's our global food supply system that's impacting climate change, which makes for higher temperatures, which then makes it more difficult to create the food we need. According to the United Nations, 14.5 percent of the world's greenhouse gas emissions come from animal agriculture. That's the animals themselves, the deforestation involved, and the enormous amount of trucking of these long supply change from, you know, shipping live animals from the US to China, etc. And then, a whopping 37% of the world's humanly induced methane comes from animal agriculture. So, you will not sufficiently impact climate change if you don't address animal agriculture. I think people are starting to get this message.
Dan Carreno, Ethos ESG
We will announce in the not-too-distant future here about VegTech and Ethos and how we're partnering together. Since you are the expert in the space, Elysabeth, I thought it would be better if you walked us through what we're working on.
Elysabeth Alfano, VegTech
We are working together behind the scenes on carbon neutrality. VegTech, our ETF, will be carbon neutral. It's been a joy to work together. And I think in the not-too-distant future, we'll have some excellent press coming out about plant-based innovation and the work we're doing together.
Dan Carreno, Ethos ESG
We're really excited to work with VegTech on this and help to reassure investors if they invest in a product, it's not going to be generating more emissions, contributing to the problem.
Elysabeth Alfano, VegTech
We want those scope 3 emissions. Right now, the SEC's pushing for scope 1 and scope2. We're going out to everybody in our fund, and we're requesting those scope 3 emissions. They might not all have them yet, but it's this process that we're working on together to move the needle. And that's what we're trying to do.
Brittany D'Amico, Ethos ESG
So, in connection with that, a recent article from Cornell says that approximately 10% of Americans over the age of 18 consider themselves vegan or vegetarian. So hypothetically, this means that an advisor with 150 clients has 10 to 15 clients who identify as vegan or vegetarian. Can you speak to the market demand for vegan-conscious investment solutions?
Elysabeth Alfano, VegTech
I love vegans and vegetarians. I'm one of them. It's a great group of people, but we are completely insignificant and have no political power. When I think of the huge market opportunity, I think of the person who's heard from their doctor to cut back their meat consumption. Those flexitarians are not 10% of the market; that's everybody. Walter Rob says plant-based innovation and alternative proteins are the largest trends he's ever seen in his 40 years of grocery store management. It's a megatrend. China's going to change. Africa's going to change. Europe's going to change. America's going to change. Everyone's going to start switching to that planet-friendly diet. That's a lot bigger than 10%.
Dan Carreno, Ethos ESG
Elysabeth, can I ask you just about the pricing power here? From the perspective of sustainable resource use and the inputs required to create meat, and when you compare that to some of these new technologies, from the outside perspective, it just seems impossible to me that traditional meat production methodologies can succeed in that world. It's just going to be a more expensive way to create protein.
Elysabeth Alfano, VegTech
A hundred percent. This is a megatrend because the industry wants this shift to happen more than anyone else. The price of the inputs to making meat is distinctly related to food insecurity and the business bottom line. So, let's talk about that. I'll ask you a little bit of trivia. Okay. So, we have 7.7 billion people on the planet. How many animals do you think are in factory farms right now for food?
Dan Carreno, Ethos ESG
I'm going to say 10 billion.
Elysabeth Alfano, VegTech
Talking only land animals, not fish, it's 80 billion. You've got ten times more animals and factory farms than you have people on the planet. So now you see the scale of what we're talking about. Well, how do you feed 80 billion animals? So, you cut down trees, and then you grow crops. So now you see the resource issue that we have. We're going from 7.7 billion people on the planet to almost 10 billion people by 2050, but you're not getting more land, and you're not getting more water. Animal agriculture takes about 42% of our clean water supply. So, you see the inefficiency. The cost of goods sold for the business is very expensive. This is why it's a food insecurity issue. We're not giving that food to people. We're giving that food to animals. So, you start to see the absurdity of the equation. Industry would like not only to save on the cost of goods sold; they want to get that risk off of their books. The risk of pandemics. The risk of polluting water. The risk of using so much water. The risk of being responsible for climate change. This is what business does. It sees a problem and an inefficiency, and it solves it at scale, and there's money to be made there. So now you've got the consumer, industry, and governments all wanting the same thing. That's why this is a trend.
Dan Carreno, Ethos ESG
What are the technologies that get you really excited? I know that there are many different ways that people are innovating in terms of creating alternative forms of protein. So, what are the, what are the ones you think are going to win?
Elysabeth Alfano, VegTech
We're looking at greenhouses, vertical farms, sustainable fertilizers, precision watering, and other ag-tech. Then we also invest in the next level up in the supply chain. These B2B companies license their precision fermentation and cultivated meat technologies. Then we have the ingredient companies and the flavor and texture companies. Then we have these consumer-packaged goods for food, and we also want a sustainable material supply system.
Elysabeth Alfano, VegTech Invest
I encourage everyone to go try it because it'll be a taste test. You tell me. I want you to say to me on LinkedIn, find me. If you can tell the difference, I am telling you it is ice cream. It's not like a coconut version of ice cream. It is ice cream without that factory. And that factory uses so many of our resources. I'm very excited about that and cultivated meat. So that's meat, you know, growing, not a little bit of a product like casein, but growing an actual steak in a controlled scenario. So, we call it cultivated meat. That is about eight years coming down the pipeline. And we've got a company out of Israel, and more companies are coming, and we're an actively managed ETF. So, we can include them in our ETF if they are sound financially; of course, other restrictions we look at, but I'm assuming they are this kind of technology is really coming. We haven't even talked about something like food justice; imagine who eats filet mignon, this little, tiny piece of the big cow, very few people. But if you are making cultivated meat in a controlled scenario, let's say for the state of New York, it's filet mignon for everybody. So, it's really interesting.
Dan Carreno, Ethos ESG
Fantastic. Well, Elysabeth, thank you so much. I, I have so many more questions, and we could keep this going for a very long time, but just in the interest of time, we'll start wrapping it up. And before we do, we're gonna play a quick round of our traditional ESG Trivia.
Let's start with the one that wasn't going to be obvious when it came to resource use. So, I looked up using the example company Beyond meat and looked at one pound of their plant-based ground beef substitute and how much water was required to produce that product. And then, I compared that to the amount of water required to produce one single chicken egg, so pretty close. What do you think required more water, the chicken egg or the one pound of Beyond Meat beef?
Elysabeth Alfano, VegTech Invest
The chicken egg has to be.
Dan Carreno, Ethos ESG
Yeah, and I lied. It wasn't even close. So, what it ended up being was four and a half gallons of water for one pound of Beyond Meat and 53 gallons of water to produce one chicken egg.
Elysabeth Alfano, VegTech Invest
Oh my good Lord.
Dan Carreno, Ethos ESG
Okay. So next question. Now we're going to dig a little into the Ethos ESG database. We keep comprehensive ESG information on 8,500 companies, so we went into that database. I looked for companies involved in animal cruelty, factory farming, and those associated with the fur industry. So, kind of a comprehensive animal screen, if you will. What percent of those 8,500 companies get screened out under those considerations? And this is going to be multiple choice. Is it going to be 3%, 14%, or is it 42%?
Brittany D'Amico, Ethos ESG
I'm going to say 42%
Dan Carreno, Ethos ESG
Actually 14%, 14%. The last question here is going to be a little bit more of a fun one. And as a dog owner myself, I was thinking about how many people feel passionate about animals and that they shouldn't be commodities. So, the question is, out of every ten people in the United States, how many of them own pets?
Brittany D'Amico, Ethos ESG
I'm going to go high - I'm going to say seven out of 10.
Dan Carreno, Ethos ESG
That is correct. 70% of Americans have a pet in their house. So, again, I think it just speaks to this perception that, well, I think all things being equal, if I did not have to slaughter an animal to get protein versus having to do that, I think a lot of people would have the preference to eliminate that sort of animal supply chain.
Elysabeth Alfano, VegTech Invest
There's been a lot of studies done on this. And that is the answer. That's what comes out. If all things are equal, if it's, you know, the same amount of money and it's nice to taste, and I can afford it, I'll take my protein by not having animals and factory farms or slaughtering animals in any way. And that goes across all political lines, same for Democrats as it is Republican.
Dan Carreno, Ethos ESG
I want to thank you both so much for your insights and perspectives on this topic. Thank you for tuning in today. We will be back soon with another episode of The Ethos ESG podcast.
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