Sustainability risks at so-called megafarms in Asia are having a “catastrophic” impact on public health and the environment and pose “significant potential to derail returns”, according to a report backed by pension fund giant APG.

The report from the $3trn (€2.6trn) investor network FAIRR and specialist consultancy ARE (Asia Research and Engagement) urged investors to treat the rise of intensive factory farming across Asia with extreme caution and warned them to keep a close eye on the long-term risks of food-related assets across the continent.

Jeremy Coller, founder of the FAIRR Initiative and CIO of private equity firm Coller Capital, said: “Asia’s meat, seafood and dairy industries face a range of badly managed sustainability risks – from emissions to epidemics, fraud to food safety, and misuse of antibiotics to misuse of labour. All these issues have significant potential to derail returns.”

The report highlighted OECD predictions that Asian meat supply would grow 19% by 2025, generating some 346m tonnes of greenhouse gasses – equivalent to running 100 coal-fired power plants. It also predicted that Asia would increase its use of antibiotics by over 120% in chickens and pigs alone, using 51,000 tonnes of antibiotics by 2030.

The World Health Organisation and the United Nations have previously warned that excessive use of antibiotics could lead to the medicines becoming less effective.

The FAIRR report said that Asia was still beset by food safety scandals. Most recently, eggs produced in Taiwan were found to have high levels of dioxins, a toxic substance often found in herbicides and pesticides. Three years ago, the news that a Chinese supplier to McDonalds and Yum! Brands was using expired meat led to a combined hit to the two companies’ market cap of $10.8bn.

Stuart Palmer, head of ethics research at Australian Ethical Investment, said that population growth, urbanisation and rising incomes in Asia had resulted in a mass shift from traditional farming to industrial farming. “But the model is broken,” he said. “From antibiotics to animal feed, the inputs that Asian factory farms rely on to do business are proving catastrophic for public health and the environment.

“It is crucial that investors understand the rapidly evolving Asian food landscape in order to safeguard the value of their investment portfolios and to support development of sustainable food production and consumption models.”

However, the report emphasised some “excellent investment opportunities”, such as Quorn – a meat substitute owned by by Asian food giant Monde Nissin, which saw global sales rise by 19% in the first half of 2017.

Note: A previous version of this article referenced the California State Teachers Retirement System. This was an error contained in the press material, and this fund has not officially backed the report.