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Nest on tackling the obesity crisis: Food for thought

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5 Apr 2022

Georgina Chiu, a senior ESG analyst at Nest outlines why corporate efforts to make food and drinks healthier are a key priority of Nest’s ESG strategy.

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Georgina Chiu, a senior ESG analyst at Nest outlines why corporate efforts to make food and drinks healthier are a key priority of Nest’s ESG strategy.

On 7 March, Unilever announced that it will set new targets to reduce salt, sugar and calories across its portfolio of products. This means the world’s largest ice-cream maker, which is also responsible for goods like Hellmann’s mayonnaise, Knorr stock cubes and Marmite, will now publish nutritional scores against these products, and made a firm commitment to sell healthier choices.

It’s something Nest has been following carefully and were delighted with Unilever’s announcement. For the past few years, we have seen rapidly evolving regulatory trends and consumer expectations towards healthier food and drink ranges. In the same way responsible investors identify climate change or poor workers’ rights as key investment risks, supermarkets and food manufacturers need to be ahead of the game on healthy food markets.

Nest has millions of pounds invested in companies like Unilever, Sainsbury’s and Nestle. We want to ensure they are making positive decisions about their long-term future. After all, our members could be investors in them for decades to come.

Obesity challenge

In the UK alone, where obesity is now a bigger cause of death than smoking, it has an estimated economic cost of £27bn. It’s calculated that poor diets cost £54bn a year in lost earnings and profit in the UK. The soft drinks industry levy is one step of what could be many interventions from the government which will make selling unhealthy products harder.

Companies overly exposed and dependent on these products could see their bottom line impacted. There’s also an opportunity to tap into a growing market for healthy products. There’s a clear trend of consumers being more conscious on what they put in their body and if companies can successfully tap into them, then it increases profits and help boost our members’ pension pots.

However, last year Unilever claimed that around 60% of its products were healthy, despite an independent review from Access to Nutrition estimating the figure to be closer to 17%. Many investors believed they could do more and behind the scenes groups such as ShareAction and shareholders like ourselves have been raising these concerns. We had had good discussions but no progress.

In January, we increased the pressure on Unilever. A shareholder resolution was proposed for its annual general meeting (AGM), calling for greater disclosure against government-endorsed health models and more ambitious targets on increasing health food sales. Nest publicly pre-declared its intention to vote for the resolution on 28 February, making it clear it had our full support.

No more easy rides

The coordinated approach with ShareAction and other investors helped encourage Unilever to introduce the changes we wanted. The lead up to AGMs is a unique opportunity to catch the attention of organisations who want smooth and conflict-free meetings. It’s a time when shareholders can speak up and be more likely to have their voices heard.

After all, investing without engaging means we are failing to speak up for our members and their best interests. The turmoil at Exxon Mobil’s AGM last year, when a shareholder revolt prevented board member appointments, sent a shockwave through companies and their executive teams. No longer can they expect easy rides at their AGM, and nor should they.

As stewards, representing the interests of millions of UK pension savers, we should be asking difficult questions. Being active around AGM season is an important way to fulfil our fiduciary duty and coalitions like ShareAction’s Healthy Markets can reduce the pressure on investment teams, while also increasing the impact interventions can have.

Another example is the Workforce Disclosure Initiative (WDI), which is now a coalition of more than 60 investors. This group encourage companies to disclose meaningful data around corporate workforce and supply chain practices so we can benchmark corporate performance.

If you do not already, I would encourage trustees to ask how their fund managers approach AGM and how they intend to vote. Our recent engagement with Unilever hopefully demonstrates the success shareholders can have in bringing about sustainable business practices.

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