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When it comes to making the food system more healthy, powerful investors in the financial sector may have more influence than anyone.
And while their underlying motivation may differ from consumers or those of us in the organic food industry, they have the capacity to bring about badly needed change.
In a letter from the UK-based non-profit group ShareAction, and backed by institutional investors who collectively manage over $3 trillion in assets, the CEOs of PepsiCo, Coca-Cola, Mondelez, Kraft Heinz, Kellanova and General Mills were asked to adopt internationally-accepted nutrition standards for publicly reporting the healthiness of their sales.
“For most of our investors, this is a financial issue,” put forth Thomas Abrams, co-head of health at ShareAction. “However, they recognize that poor diets have a bad effect on the overall economy, which hurts their portfolios, especially because they are diversified. This aligns with the health argument and being able to identify where risks are coming from.”
Tom Sanders, Senior ESG Analyst at Nest, whose pension fund is a signatory to the letter, said, “The increased consumption of unhealthy products harms public health and could reduce worker productivity, creating externalities that can impact our long-term investment returns as a globally diversified investor.”
Internationally-accepted nutrition standards have been developed by a handful of governments around the world and are focused on macronutrients, as well as salt and sugar. The standards, also known as nutrient profile models, are a way for investors to analyze the healthiness of each company’s sales.
Not surprisingly, the pushback from Big Food has been strong.
“Aside from Danone and Unilever, not one of the companies that we have addressed our letter to is being transparent,” said ShareAction’s Thomas Abrams. “These companies say there is no consensus on what models to use, and that is the excuse they give as to why they are using their own models. This does not allow investors to make a determination of who is improving versus their peer group or how exposed any company is to risks from regulation or changing consumer demand.”
By failing to provide the information that many investors would like to see, ShareAction believes that some funds may sell their positions in these food company stocks, while other investors will hold and push for desired change.
TARGETING GMOS AND PESTICIDES
Even though ShareAction’s investor letter does not specifically address the financial risks of a food company’s use of GMOs and toxic pesticides, something of tremendous relevance to our industry, there are other initiatives in the marketplace focused on this area.
As we previously wrote about, mandatory ESG reporting standards were initiated by the International Sustainability Standards Board (ISSB) a few years ago.
“ISSB will mandate the disclosure not only of emissions, water and waste but chemical use and GMOs, forcing companies to shift to a more responsible way of doing business,” said Elisa Turner, founder of Impakt IQ and an expert in ESG. “Companies will have no choice but to participate, and it will affect everything that they do.”
While these standards are still being rolled out and their true impact has yet to be felt, the non-profit group Friends of the Earth, in collaboration with the Netherlands-based research group Profundo, just released a new report that finds that the U.S. food retail sector’s use of pesticides on just four crops could result in $219 billion in financial, climate and biodiversity risks between now and 2050.
“A major part of the risk food retailers face is loss of reputation as reliable suppliers of healthy food for consumers — a risk that shareholders should take notice of,” said Gerard Rijk, equity analyst at Profundo.
For decades, food companies have largely avoided scrutiny regarding the harm that their products have caused to human health and the environment.
Eluding the investment community, which is beginning to recognize the serious financial risks created by this business model, will become a far more perilous and difficult task.
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With gratitude, 
Max Goldberg, Founder |
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