I met VegTech Invest CEO, Elysabeth Alfano at the 2023 ESG for Impact Conference, where she made a strong case for investing in food and agricultural systems innovation as a method for reducing greenhouse gas emissions and other environmental harms.  I wanted to learn more about the specific innovative companies she thinks are worth investing in, and so I interviewed her and VegTech Invest Chief Investment Officer, Dr. Sasha Goodman about these themes.  The interview follows. 

 Tom Konrad Ph.D., CFA –

Editor

 Q: Thanks for taking the time to speak with me.  To begin with, can you tell us what VegTech is and why investors might want to invest in the theme.

 Ms. Alfano: VegTech is the innovation that is driving the transformation of sustainable food systems, moving away from inefficient and unsustainable animal proteins and replacing them with nutritious alternatives that are significantly less damaging and, at scale, less costly.  Given the problem-solving nature of these innovations, this theme reflects an anticipated megatrend in which all consumers adopt – to varying degrees – proteins that are more nutritious, more prolific, take less time, require fewer inputs and create less damage.

This represents a significant opportunity to make money with this trend, as well as potentially bring down the carbon footprint of one’s portfolio by investing in this theme.

Q: What percentage of world GHG emissions come from the food system and what is the potential for reducing these emissions by 2030 and by 2050?

 Ms. Alfano: Conservative estimates state that 16.5% of the world GHG emissions come from animals as food.  More significantly, 32% of the world’s global methane emissions come from grazing and growing crops to feed animals.  Life cycle analysis shows the delta of impact for a plant-based burger is 99% less water, 93% less land, 90% fewer greenhouse gas emissions emitted and 46% less energy used.

Impact by 2030 and 2050 will depend on how much capital is driven (through the public markets, but also governments) to VegTech innovations.    According to the Boston Consulting Group, investing in VegTech/Alternative Proteins is 3x-40x more impactful at reducing GHG emissions than investing in alt energy, electric vehicles or alternative building materials.  This is primarily because the CapEx needed to build out the VegTech infrastructure is much lower than the other sectors, so adoption and impact can happen faster.

Q: What are the current options for public market investors to access this theme?

 Our research shows that there is only one option for this theme in the public markets: EATV ETF (NYSEArca:EATV).

 Q: I note that EATV is an actively managed ETF.  Why did you choose an active as opposed to a passive, more index-based approach?

 Ms. Alfano: Markets are dynamic and this sector is dynamic, with anticipated IPOs for novel technology companies. Therefore, we thought it best to have the option to make decisions without restraint. Still, the ETF trades quarterly and, thus, is mindful and disciplined regarding turnover.

Lastly, it is rare to see an ETF led by industry sector experts, but both Stanford educated Dr. Sasha Goodman, Portfolio Manager of EATV, and Elysabeth Alfano, CEO of VegTech Invest, are food systems transformation experts who understand and are involved in the nuances of the shifting global food supply system, as well as being venture and private investors.

Q: How do you decide if a company that’s involved in the food system belongs in the VegTech theme? How many companies are currently in your investing universe?

Dr. Goodman: We continually scan the landscape for plant-based companies, starting with a pool of over 100 potential candidates, as listed in the VegTech non-tracking index EATVi. Companies are selected based on rigorous quantitative and qualitative analysis, including in-depth revenue research. We sample around 50 products per company, aligning them with revenue segments to ensure they meet our prospectus criteria, ultimately choosing those best positioned to leverage market trends in sustainable food systems transformation. These are companies that are innovating for efficiencies and disruption and fit into our categories, which notably include business-to-business players, such as flavor technology and ingredients producers and synthetic biology specialists, in addition to the plant-based consumer goods.

Q: How has the ETF performed in comparison to EATVi?

 As of 10/31/23, the actively managed and non-tracking ETF, EATV, surpassed the EATVi index across the 1, 3, 6, and 9 month cumulative periods, and the 1 year average annualized periods.

Q: What technologies or methods for transforming agriculture are you most excited about?

Ms. Alfano: We are most excited about both fermentation and cultivated meat.  Cultivated meat, growing meat from cells, is still 6-8 years away from scaling, so I will discuss fermentation here.   We have been fermenting foods for hundreds of years: kimchi, vegetables, tea, bread, and beer are a few examples.  It makes good sense that we would now ferment proteins.

Companies like Gingko Bioworks (NYSE: DNA) engages in partnerships and collaborations where they provide their services and expertise to help other companies develop and produce bio-based products. This is often done through the use of Ginkgo’s platform.  Lamb Weston is selling potatoes to be fermented as protein.  AB inBev, the largest fermenter in the world, is now fermenting proteins through its company BioBrew.  It is exciting to see a company of such size and expertise, now focusing its attention on feeding a growing population quality proteins, without damaging the planet.

Q: Under what circumstances is controlled environment agriculture (greenhouses, etc.) better for the environment than field agriculture, and when is it worse?

Dr. Goodman: Controlled environment agriculture (CEA), like greenhouses, is generally more eco-friendly than traditional agriculture. When positioned near urban areas, CEAs reduce transportation emissions, offer fresher product that can last longer and minimize food waste. Their enclosed nature safeguard waterways by limiting pesticide and fertilizer runoff, and operate with 70-95% less water use, also utilizing rainwater collection. Modern CEAs optimize natural light, use energy from biogas, and CO2 from industrial sources, enhancing sustainability. Linking CEAs to renewable energy sources such as wind, solar, or geothermal eliminates dependence on non-renewable energy.

Q: EATV’s full holdings are available for review here: https://eatv.vegtechinvest.com/full-holdings.  Please describe how your top 3 holdings are helping reduce the environmental impact of the food system.

Dr. Goodman: VitaCoco’s (NASD:COCO) specialization in coconuts puts them in a good position in the Plant-based Innovation food supply chain. They currently offer coconut water, coconut milk, and coconut oil. Their coconut milk is a dairy alternative that lasts around 12 months on the shelf, and is less likely to spoil and therefore reduces food waste. Both their coconut water and milk are shelf-stable. Notably, their ability to produce coconut oil positions them well in the supply chain, as it is a popular ingredient in plant-based meat recipes. Coconut oil is currently a primary fat source in many plant-based meats due to its semi-solid state at room temperature, which makes it a better substitute for solid animal fat than other plant oils.  Further, VitaCoco is also committed to eco-conscious initiatives, investing in recycling infrastructure and promoting regenerative agriculture.

Celsius (NASD:CELH) offers plant-based energy drinks made with natural ingredients like green tea extract and ginger. Their products, packaged in recyclable aluminum cans, align with sustainable practices, emphasizing a long shelf life and the use of recyclable materials.

e.l.f. Beauty (NYSE:ELF), while not food-related, focusing on carbon reduction and ethical practices. Material companies like this comprising about 20% of the fund portfolio.

Q: I found a few of your holdings surprising, since I had not previously associated them with food system innovation.  Can you tell me how you believe DOLE and TESLA are helping make our food system more sustainable?

Ms. Alfano: Dole (NYSE:DOLE) is the OG of non-dairy ice cream, if you will, with the Dolewhip product.  But much more on the cutting edge is that Dole is upcycling is pineapple skins to produce alternative leathers.  Ultimately, if we are making less beef, we are making less leather.  And given the environmental footprint of a tannery, that’s a good thing.

Alternative materials act as a follow-on hedge with alternative proteins if you will, per the above.  It is for this reason that EATV focuses around 80% on food and 20% on materials. Not only does this give the fund diversification, but also capitalizes on the innovations that are occurring around replacing environmentally damaging animal products from supply chains.

Enter Tesla (NASD: TSLA).  Tesla was the first car manufacturer to mandate only having alternative leather in its vehicles. This prompted Mercedes and BMW to have around 50% alternative leather for their cars.  Automobile leather is second only to shoe leather for its large-scale production, so it is meaningful to have car companies move away from leather per Tesla’s initiative.

Q: One company I immediately expected to see were companies focused on plant-based food products like Beyond Meat (NASD: BYND and SunOpta (NASD:STKL), but I was surprised to note that these names each account for less than 1% of your portfolio, when your top holding (Vita Coco/COCO) is almost 10%.  Why do you have such low allocations to such obvious VegTech names?

Ms. Alfano: We allocate in the fund according to a mix of qualitative and quantitative considerations: performance, financials, potential IP moats, CapEx spends, EBITDA and revenue growth and profitability, volatility, in addition to considerations of environmental and human rights goals. The companies can’t just have great innovations. They also have to be well performing companies for larger allocations.

The markets have been tricky and that has been almost without exception for all companies, bar a few.  We believe two things are at play: small and mid-cap companies, which is around 70% of EATV, are undervalued at the moment, leaving room for a great buying opportunity.    The markets have not yet priced in the magnitude of demand and necessity for food systems transformation.   Thus, currently, EATV offers high growth companies and low growth prices.  We do believe it is a great time for buyers to get into the EATV ETF as we see food innovation coming to take center stage in the investment community on the near horizon.

 Q: Moving beyond investing for a moment, can you describe a few actions people can take in our personal lives to help make the food system more sustainable?  What is the potential for each of these actions to reduce our own carbon footprints?

 Ms. Alfano: For starters, investors can invest in the EATV ETF to potentially lower the carbon footprint of their portfolios.  EATV is determined by ACA Global’s Ethos ESG to be the only ETF to be Carbon Neutral without buying credits due to the emissions avoidance impact of the fund.  It isn’t producing large amounts of emissions, thus, doesn’t need credits to cover them up.  Perhaps this is best illustrated by the following:  Ethos ESG has found the global temperature warming potential (image attached) of EATV to be 1.18C, well below the Paris Accords recommendation.  For a reference point, the global temperature warming potential of one of the most common investments, the S&P 500 index, is 3.87C.

Beyond investing to lower the carbon footprint of one’s portfolio, Project Drawdown, the Physician’s Committee for Responsible Medicine and the Intergovernmental Panel on Climate Change (IPCC) all agree that one of the most important things one can do for the environment is to remove meat and dairy in part or in full from one’s diet.

The LinkedIn, San Francisco headquarters took its employee cafeteria two-thirds plant-based for 1 month, with meat and dairy still available, but less than usual, and the employees 1) dropped their meat consumption by 55% and 2) the company as a whole dropped its CO2 by 14,000kg.  Further they received letters of thanks from the employees who had been trying to eat better for their own health and healthcare costs but were finding it hard when fried meat and rich dairy fats were the choices they were given.  They were happy for the healthier options and the company was also happy to reduce its CO2 numbers and in the long-term, they believe, their corporate healthcare costs while improving employee productivity.

 Q: What else do you think stock market investors should know that I have neglected to ask about?

 According to OurWorldinData.org, 41% of the world’s tropical deforestation is driven my growing crops for animal feed and grazing animals.  According to the United Nations, animal agriculture is the leading cause of biodiversity loss and deforestation due to growing crops and grazing for animals who get the food instead of people.

According to the U.N., the population will grow from 8B to 9.7B by 2050, but we won’t get more land or water.  A growing middle class in Africa, India and China will increase the demand for meat without the natural resources to sustain this.

These aren’t new data points and governments around the world are deeply focused on food insecurity and the political insecurity that comes from this.  Israel, China, the Middle East, Singapore, German, Holland, Canada and the U.S. are all investing in the infrastructure and innovation, along with private investors and now, through EATV, and the public markets.    Shifting the food systems isn’t a nice option or a preference. It is a necessity and the production and adoption is expected to shift quickly according to meat industry experts at Cargill.

Synthesis Capital, based on the think tank, ReThink X, anticipates the tipping point adoption of 10% around 2035 with earlier investment opportunity and growth to be made before the tipping point.

We believe the VegTech sustainable and prolific proteins theme, as exemplified in EATV, is a very strong thesis.  Please reach out to either Stanford educated Chief Investment Officer, Dr. Sasha Goodman, or VegTech Invest CEO, Elysabeth Alfano at Info@VegTechInvest.com. For more information on the Plant-based Innovation & Climate ETF, EATV, and to view the full holdings, visit https://EATV.VegTechInvest.com.

The post EATV: An ETF for Investing in the Agricultural Transition (Interview) appeared first on Alternative Energy Stocks.

by Jim Lane

If you’ve not heard, NuGenTec is looking for Distillers to help supply Ethanol for Hand Sanitizers in California! We have two automated bottling lines waiting for ethanol to produce 8oz and 16oz gel type hand sanitizers, they write. You can learn more here.

And as we reported this morning, Aemetis (AMTX) is one of those companies jumping into the market, even as transport fuel demand falls off, driving fuel ethanol prices into an all-time low range of around $0.70 per gallon.

The shortage is real

If you’ve been trying to buy hand-sanitizer, it’s been hard to find. Here in Digestville, we’ve been making our own from 25 percent Aloe Vera and 75 percent rubbing alcohol. Most authorities have emphasized a 2:1 alcohol to Aloe Vera ratio, but Aloe Vera has also been hard to find near Digest HQ. On Friday, a shipment arrived but it was the industrial bags that go in large dispensers at offices and hospitals, not the individual spray bottle variety.

The catalyst

The catalyst? In response to the Coronavirus Disease 2019 (COVID-19) pandemic, the Alcohol and Tobacco Tax and Trade Bureau (TTB) created exemptions allowing certain alcohol fuel permit holders to sell ethanol (alcohol) for use in the production of hand sanitizers.

Consequently. Aemetis, Inc. said its 65 million gallon per year ethanol plant near Modesto, California has begun shipments of 200 proof alcohol for use in the production of hand sanitizer, which is in a significant shortage created by the worldwide spread of Coronavirus (COVID-19).

“Can’t hand sanitizer save the industry now?”

As an Argus media reporter asked at an emergency RFA online press conference on the coronavirus crisis, “why can’t the whole industry pivot to industrial ethanol production? Why can’t hand sanitizer save the industry now?”

The response from Randy Doyal, CEO, Al-Corn Clean Fuel, based in Minnesota was that there would be less vodka but more hand sanitizer coming in the next week to 10 days.

The good news

As Raymond James’ Pavel Molchanov observed this week, “Just as automakers converted their plants to supply tanks and fighter jets during World War II, and those same companies are now looking at supplying ventilators, many other enterprises amid the COVID-19 crisis are looking for creative ways to address the public health emergency. Here is one that, we admit, we would not ordinarily think about: producing hand sanitizer from corn ethanol.

“Aemetis, an early entrant into this market, points to prospective pricing of $70+ per gallon (yes, really). Amid oil prices at nearly 20-year lows, well below $30/Bbl, it goes without saying that ethanol prices are depressed: currently around $1.00/gallon. Selling into the hand sanitizer market can offer pricing that is 70x higher. Yes, you read that right. To be sure, the economics vary on a site-by-site basis, based on (among other things) proximity to hand sanitizer production facilities. Aemetis (AMTX), which produces ethanol in California, has the advantage of being located on the West Coast, and last week it became one of the first ethanol players to take advantage of the Treasury’s authorization. From our conversation with Aemetis, here is the economic proposition, in general terms… Retail stores are selling hand sanitizer at around $1.50/ oz. Of that, $0.50 goes to the retailer and distribution, $0.20 for packaging, and $0.20 for the compounder. That leaves $0.60 for the ethanol feedstock. With 128 ounces in a gallon, the implied selling price is upwards of $70/gallon.”

Raymond James rates this as as “a textbook ESG business opportunity” for which the economics look very lucrative. “At a time when ethanol prices are ultra-depressed due to the oil price meltdown, this is a fascinating, below-the-radar opportunity for ethanol producers, including Green Plains,” Molchanov writes.

Some market sizing

Hmm. Let’s quickly demolish the thought that this is anything but a small-scale opportunity.

The recommended usage, by the CDC, is 1.5 mL per application. Assuming, say, two usages per day by everyone in the United States, that would add up to around 45 million gallons of sanitizer over the next 6 months. Now, sanitizer is around 1/3 alcohol — so consider the maximum market size to be around 30 million gallons.

That’s US ethanol production for about 17 hours.

Now, we’ve assumed a perfect market. Imperfections abound. Two could make the market bigger, and that’s over application or simply stocking up on extra hand sanitizer. But many more factors could make the market smaller. First, not every person in America may hand-sanitize twice a day – they might wash their hands, do nothing, or the expected usage may not apply to children or people sheltering in place. Also, there are the existing suppliers of industrial alcohols. And, there is the problem of offtake contracting, manufacturing, shipping, retail display contracting and so forth.

And, the more ethanol producers that qualify for this market, the lower the price will go. Not to mention that the entire market is predicated on a waiver granted by the Alcohol and Tobacco Tax and Trade Bureau. And we know how reliable the US government has been on waivers that are friendly to the US ethanol industry.

To pivot entirely to producing hand sanitizer, every adult in the United States would have to sanitize more than 625 times per day.

Doesn’t mean it’s not a clever, niche opportunity. A 60-million-gallon ethanol plant like Aemetis’ Keyes facility could switch over say 33 percent of its production over the next 6 months or so, and the potential upside is very lucrative. So long as everyone doesn’t jump into the market and crash the price. Which presumably they will.

Donation in the offing

Some producers are simply donating ethanol to support the community.

Today, we hear that two Iowa Renewable Fuels Association members sent the first donated shipment of Iowa ethanol and glycerin to the state of Iowa to be used by Iowa Prison Industries for the production of hand sanitizer during the national shortage. The donation is made by Iowa ethanol producer Absolute Energy and Iowa biodiesel producer Western Iowa Energy. The Iowa Renewable Fuels Association (IRFA) worked with Iowa Prison Industries to secure the shipment of these products and other necessary ingredients. Templeton Rye is also providing distilled water for the project. The finished product will be distributed free of charge by the state of Iowa for priority use.

Reaction from the stakeholders

“Aemetis is moving quickly to help address the significant demand for hand sanitizer products in light of the COVID-19 pandemic during this time of national emergency,” said Andy Foster, President of Aemetis Advanced Fuels Keyes, Inc. “As the WHO and CDC strongly recommend the use of hand sanitizer products to help prevent the spread of Coronavirus, Aemetis is utilizing our ethanol production capability to address the current shortage of hand sanitizer by increasing the supply of high-proof alcohol used in the manufacturing of sanitizer products,” said Foster.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Jim Lane

In Washington, EPA Administrator Scott Pruitt has resigned.

Deputy Administrator Andrew Wheeler becomes acting administrator.

The Digest’s Take

Elsewhere in the media, it is widely reported that Pruitt was undone by a growing number of controversies and investigations relating to his conduct as EPA Administrator, particularly relating to allegations of self-dealing and using EPA aides for personal tasks. Examples are here, here and here. The frame fits the facts, but doesn’t explain the timing. Our take? The retirement of Justice Anthony Kennedy from the US Supreme Court, we think, is a factor that should be highlighted.

Given the President’s avowed list of potential Supreme Court nominees, almost no support for confirmation could be expected from Democrats in a closely-divided US Senate. That puts Senate farm-state Republicans — including the powerful Senate Judiciary Committee chairman Chuck Grassley — into a position of strength in the months-long battle by farmers to stop attacks by the EPA on the Renewable Fuel Standard, and to move the EPA ahead on approval for E15 ethanol year-long blending. It might be read as no accident that Senator Grassley issued a swift statement supporting the Pruitt ouster and citing two factors:

“President Trump made the right decision. Administrator Pruitt’s ethical scandals and his undermining of the President’s commitment to biofuels and Midwest farmers were distracting from the agency’s otherwise strong progress to free the nation of burdensome and harmful government regulations.”

For sure, there are widespread reports of displeasure and weariness at the White House with the narrative surrounding Administrator Pruitt. But why act now? We think the need to rally the GOP around a successful Supreme Court Justice confirmation is a frame that not only fits the facts, it fits the timing and fits the narrative coming out of the Senate and not just the White House press corps.

The Pruitt biofuels backstory

In May, we reported in “Trump in a pickle: support his beleaguered EPA Administrator over oil refinery bailouts, or rally his Midwestern farm-state base?” of the biofuels brouhaha that was beginning to lay a shadow over GOP efforts to bolster farm-state support as November elections begin to draw near. At the time, Senator Chuck Grassley of Iowa tweeted:

“I’ve supported Pruitt but if he pushes changes to RFS that permanently cut ethanol by billions of gallons he will have broken Trump promise & he should step down & let someone else do the job of implementing Trump agenda if he refuses.”

Grassley explicitly called on Pruitt to back a key campaign pledge from 2016 that helped unlock farm state support and propel Trump into the White House.

1/19/16 Trump at IA Renewable fuels summit: EPA shld make sure blend levels match statutory level set by Congress THAT’S 15B GALLONS/Pruitt shld work hard to make sure he doesn’t undercut the president’s support of ethanol.

Pruitt had also been the subject of numerous investigations at the federal and state level stemming from travel, budget, and transparency issues, although the embattled EPA head had enjoyed support from anti-regulatory and anti-environmental forces.

In May, we reported that United States Senators Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), Sherrod Brown (D-Ohio), Tammy Duckworth (D-Ill.), Tammy Baldwin (D-Wis.), Amy Klobuchar (D-Minn.), and Tina Smith (D-Minn.) sent letters to Environmental Protection Agency (EPA) Administrator Scott Pruitt and Carl Icahn, billionaire former adviser to President Trump and Chairman of CVR Energy Inc., to request information on reports that the EPA granted CVR an “economic hardship waiver” from the Renewable Fuel Standard (RFS). The senators have previously raised concerns about Icahn’s actions related to the RFS and his access to key Administration RFS decision makers when he was a White House special adviser.

In June, we reported that the American Coalition for Ethanol is pretty teed off that “despite repeated public endorsements from the White House to allow the sale of E15 unleaded gasoline year-round, EPA has taken no action to lift the outdated regulatory barrier prior to today’s start of the low Reid vapor pressure (RVP) season. E15 was tested and approved in 2011 for use in any car or light truck from model year 2001 and newer. EPA’s interpretation of RVP regulations effectively bans the sale of lower cost, higher octane E15 from June 1 through September 15, even though E15 has lower RVP and emissions than the gasoline sold in most markets each summer.”

Stakeholder reaction

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This Post was updated on 8/16/21.

Ethanol stocks are publicly traded companies whose business involves producing ethanol alcohol (C2H5OH) made from biomass for use as a fuel in gasoline blends. Common feedstocks include corn and sugar cane.  Ethanol is the most widely produced and used biofuel, and all ethanol stocks are also biofuel stocks.

Aemetis, Inc. (AMTX)
Andersons Inc (ANDE)
Archer Daniels Midland (ADM)
Bluefire Renewables (BFRE)
Cosan Ltd (CZZ)
Green Plains Partners LP (GPP)
Green Plains Renewable Energy (GPRE)
MGP Ingredients (MGPI)
Pacific Ethanol (PEIX)
Raízen S.A. (RAIZ4.SA)
REX American Resources Corp. (REX)
SunOpta (STKL)

If you know of any ethanol stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Ethanol Stoccks appeared first on Alternative Energy Stocks.