25 May 2023
The voluntary action that investors can play in affecting commercial change has increased in importance and urgency.
Good nutrition is fundamental to good health, yet humankind is experiencing a growing epidemic of diet-related ill health. According to the Access to Nutrition Foundation, poor nutrition – and resulting illness – cost an estimated $3.5 trillion annually, or 5% of global income. Through engaging with companies on nutrition, investors can play a crucial role in addressing this issue.
Diet-related ill health places an extraordinary burden on health care systems, governments and insurers around the world. To tackle the problem, governments are beginning to adjust the regulatory landscape, for example the introduction of sugar and calorie taxes that have been introduced in 50 jurisdictions in the world. This indicates that there are increasing financial repercussions for companies that fail to transition their business models towards healthier products and sales.
Government policy is also crucially important in creating a level playing field within which companies can operate. In summer 2021, the UK government commissioned National Food Strategy was published. Recognising the impact that unhealthy food has upon our health (80% of processed food sold in the UK is deemed unhealthy) and the environment (the food industry is the second largest contributing sector to climate change), the Strategy included 16 recommendations to build a more sustainable food system.
In June 2022, the government published its food strategy policy paper, which set out long-term measures to support a food system that offers access to safe, healthy and affordable food for all. Encouragingly, mandatory reporting was included in the white paper and CCLA welcomed the commitment to improving food industry reporting standards.
However, following the significant change that followed in the government, several anti-obesity measures, including advertising restrictions on ‘junk food’, were delayed until 2025. This was disappointing news for the investor group. With government-imposed mandatory reporting on nutrition more distant than ever, CCLA refocused attention on voluntary steps that companies can take to address the obesity crisis.
Commercial organisations – those designing, manufacturing, advertising and selling unhealthy food and drinks – have a direct influence on our eating habits. Investors can be a driving force in raising ambition on mandatory nutrition reporting and holding industry to account. Through engaging with companies on nutrition, we can make business models more resilient and play a role in improving public health.
CCLA supports ShareAction’s Healthy Markets Initiative and the Access to Nutrition Index (ATNI). The aim of the former is to improve population health by increasing access to affordable, healthy food, targeting food and beverages, retailers and manufacturers. The ATNI assesses how the world’s 25 largest global food and beverage manufacturers contribute to addressing malnutrition in all its forms: overweight and obesity, undernutrition, and micronutrient deficiency. It complements ShareAction’s Healthy Markets initiative.
Through these coalitions, CCLA has been engaging with investee companies; namely Unilever, PepsiCo, Nestlé and Coca-Cola. Primarily, we are asking these companies to commit to producing healthier products and to make these products more accessible, more affordable and more available. Our specific asks – in the role of stewardship – relate to disclosure, target setting and reporting on progress against those targets.
As investors, we can identify where a company may be missing out on the opportunity to grow in healthier products and categories. We can engage where a company is failing to see the public health impacts of its own work through the eyes of regulators and where its food portfolio may be more at risk from changing legislation than its peers. We can push for more responsible marketing and clear nutritional labelling and address concerns about a company’s approach to food manufacturing.
An example of this action was in January 2022, when CCLA supported ShareAction in co-filing a shareholder resolution at Unilever. We called on the company to align its disclosure of sales of healthier products with government-endorsed nutrient profiling models. Also, to set targets to increase the share of sales of healthier products. Following a period of ongoing negotiation with the company, Unilever pledged to set a new industry-leading standard on transparency around sales of healthy foods. It announced the new measures in a public statement on 7 March, 2022 and published its findings in October. Furthermore, Unilever has disclosed the ‘healthiness’ of its global portfolio against six government endorsed nutrient profiling models, in both sales volume and revenue and we will continue to ask the company to set meaningful targets on sales of healthy products.
This process involved a huge amount of resource and data gathering by Unilever, but the outcome proved how impactful positive investor engagement can be. Addressing the nutritional standards of the products sold by the companies we invest in is a key part of our engagement programme at CCLA and through effective stewardship, investors can play a significant role in promoting healthier markets.