Humankind is facing an epidemic of diet related ill-health. 30% of the global population is now obese, nearly triple the level of 1975. Poor nutrition – and resulting illnesses – cost an estimated $2 trillion annually, or 2.8% of global GDP.
From an investment perspective, we are faced with several considerations. Those designing, manufacturing, and selling delicious but unhealthy food influence what we consume. We are not getting fat on apples; we are getting fat on processed consumables stuffed with sugar, saturated fat and salt.
On the other hand, as businesses, the manufacturers of these products are solid, reliable money-makers. They display an excellent ability to withstand recessions, increase dividends and post consistent, incremental growth.
There is a third consideration. Governments around the world are beginning to adjust the regulatory landscape. Sugar and calorie taxes are now present in 50 jurisdictions worldwide. The European Commission plans to introduce legislation to mandate front-of-pack labelling and restrictions on promoting unhealthy products. In the UK, marketing and advertising restrictions will be placed on unhealthy products at the end of 2022. There are now financial repercussions for companies that fail to transition their business models towards healthier products and sales. These are only set to increase.
What can investors do?
There is a clear correlation between poverty and obesity. Among adults in the UK, the most deprived regions have almost double the prevalence of obesity compared to the least deprived. While the problem may appear to be one of overconsumption or ‘bad habits’, the reality is that the root cause relates to a lack of access to – and affordability of – healthier foods. Calorie for calorie, healthier foods are said to be three times more costly than unhealthy foods.
We support ShareAction’s Healthy Markets Initiative, currently backed by a total of $5.8 trillion in assets under management. Through this coalition, we have been engaging with four investee companies – Unilever, PepsiCo, Nestle and Coca-Cola – for more than a year. We are asking these companies to commit to producing healthier products and to make these products more accessible, affordable and available.
Unilever’s ‘blind spot’
Despite Unilever’s reputation as the corporate world’s sustainability darling, the 2021 Access to Nutrition Index report shows that only 16% and 17% of its UK and global sales respectively come from healthier products; lower than many of its competitors (including Danone, Nestle, Kraft Heinz and PepsiCo).
In January 2022, CCLA joined ShareAction and more than 100 other investors to co-file a shareholder resolution at Unilever. We are calling on the company to align its disclosure of sales linked to healthier products with government-endorsed nutrient profiling models. Also, to set targets to increase the share of healthier products sales by 2030. While Unilever uses its own science-based system to define ‘highly nutritious products’, until the company reports against government-endorsed models, the risk to the business from changing health-related legislation remains a complete unknown. This is a concern for shareholders.
We have always believed that healthy communities underpin healthy markets; human health in the broadest sense is the next big systemic risk for investors. Through the decisions it makes on the design, labelling, marketing and advertising of its products, Unilever has a real opportunity to improve the health of its customers – 2.5 billion-strong across 190 countries. As a sustainability leader, we are hopeful that the company will see the merit in our asks.
Amy Browne is Stewardship Lead at CCLA Investment Management
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