Food, nutrition and health: how we seek to influence change

Our existing food system cannot sustain the additional two billion inhabitants our planet is expected to accommodate by 2050. This is the driving force behind the second United Nations Sustainable Development Goal (SDG), which aims to end hunger, achieve food security, improve nutrition, and promote sustainable agriculture.

According to the Access to Nutrition Index, one in three people worldwide are either overweight or obese; over two billion have micronutrient deficiencies; and in 2019, an estimated 690 million people were undernourished.¹ While this highlights the initial scale of global health issues stemming from our food system, the impact of what we eat goes far beyond our weight; our diets can also give rise to a plethora of further health problems, which come at a long-term human and economic cost.

As a result, the sustainability of our food system continues to be an area of engagement and research focus. Our objective for companies that we engage with on this issue is to ensure that there is a strategy to reduce the social and environmental impacts of products and operations across the full value chain. We want to see improved nutritional content of food without further increasing the strain on our environment, as well as access to affordable, nutritious and sufficient food on a global scale.

A collaborative approach

We view a collaborative approach as an effective way to engage with companies on this topic, and have been working alongside ShareAction’s Healthy Markets initiative, now a part of the Long-Term Investors in People’s Health (LIPH) initiative, which focuses on improving the health of society.

Collaborative engagement can increase the leverage of investors, through more bodies in the room and overall higher assets under management represented. We believe collaborative action is even more effective when engaging on health and nutrition given the technical nature of the issue. If we want to see meaningful disclosures by companies and real-world outcomes in the food environment, we must be specific and consistent in what action we encourage companies to take through our engagements. We want to avoid the risk that a lack of understanding of the detail and inconsistencies in requests can place an undue burden on companies to report varying flavours of the same issue, and therefore does not have the intended impact.

Engaging with food retailers and manufacturers

We have supported engagements with leading UK food retailers and manufacturers. As debt and equity holders, we have engaged with Tesco, and were encouraged by its public target in 2020 to achieve 65% healthy food sales by 2025. Since then, we have continued to engage with the company to understand how it plans to meet this target. This included a site visit to Tesco’s head office to meet with experts in product development, senior leadership and the non-executive independent director with responsibility for sustainability. We were impressed with the detailed level of work to prepare for incoming regulation, including moving more than 40% of its products within stores, developing new products which will meet consumer expectations, and reformulating existing products to improve nutritional quality.

Similarly, in 2020, Sainsbury’s stated a long-term target of 57% healthy food and drink sales and 26% ‘Better for you’ sales by 2025.² Furthermore, in 2021 Sainsbury’s updated its definition of ‘healthy’ to follow recommendations by the Healthy Markets initiative, a successful outcome of our engagement efforts. While this may not appear a significant development, this is important to ensure that companies are prepared for incoming regulation and are consistent in their definition of ‘healthy’, which is naturally a subjective term. We have also been encouraged to see that Iceland committed to report on its proportion of healthy sales during 2022, which was a key ask in our engagements with the company. As a low-cost retailer, Iceland is particularly important given the links between income and obesity and nutritional deficiencies.

Regarding food manufacturers, we have engaged with Unilever alongside the Healthy Markets coalition.³ Despite being a leader in ESG and having a purpose-driven approach to business, its disclosures around nutrition lagged leaders in the food space. We were therefore pleased to see Unilever’s announcement in March 2022, and its subsequent disclosures in October, on the nutritional profile of its products based on six nutritional profile models, covering 16 strategic markets, based on both volume and revenue.⁴ This reporting is best in class and we hope that it will raise the bar across the industry in disclosing the proportion of healthy products within a company’s product portfolio versus government-endorsed models. However, we intend to continue encouraging Unilever to use government-endorsed models to set its targets, rather than its own model.

Influencing policy

As investors, we are not the only group that can have an influence on companies; there is a range of stakeholders that are looking to engage with and change the behaviour of companies, and by taking a collaborative approach to engagement with a variety of stakeholders, we are able to have a greater impact not only at company level, but also on policy. A good example of this is the work that the Healthy Markets initiative, in conjunction with the Food Foundation and others, is doing. This includes our public support of a letter urging the government to establish mandatory reporting for retailers, in line with the UK National Food Strategy’s (NFS) recommendations. Greater transparency means that investors are better able to assess the risks and opportunities and allows for easier comparability across the sector. The Healthy Markets initiative therefore provides us with an effective forum to put forward our views and to provide an investor’s perspective on the discussion around health and nutrition.

Following our support for the NFS recommendations, we participated in a call with the UK government Department for Environment, Food and Rural Affairs (DEFRA) to advocate for mandatory nutritional reporting, and to have investors formally consulted on issues relating to food sustainability at the regulatory level. Newton was one of four investors to speak on behalf of this coalition representing almost US$6 trillion in assets under management. The coalition will follow up to hopefully provide technical input to regulatory consultations to ensure any regulation is appropriate for the industry, investors and other key stakeholders.

Shaping the debate

Finally, we have also used our expertise to shape key investment and sustainability debates. For example, Newton acted as one of three moderators for a round-table discussion hosted by the Farm Animal Investment Risk and Return (FAIRR) initiative, which included investors, companies and non-governmental organisations, to discuss reporting on food portfolios regarding protein diversification. We sought to answer how companies should report on exposure to animal, plant-based and alternative proteins, and what the challenges and barriers are. This was one of the first events on this topic and was welcomed by investors, who struggle to compare and understand how overall food portfolios are evolving, as well as companies, which experience challenges in collating this data and articulating protein exposure to investors. This discussion will shape the asks of future FAIRR sustainable protein engagements, focusing on improved metric disclosure and setting time-bound commitments.⁵

Conclusion

Our current global food system is clearly unsustainable. We think about this not purely as being a good steward of our clients’ assets; as regulation increases and consumer preferences change, companies will be forced to adapt and this will present risks and opportunities for investors. We engage with companies we invest in because we believe that we have the potential to contribute to creating a more stable food environment for the future, which will naturally have an impact on the investment portfolios we manage.

Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.

¹ Access to Nutrition Initiative, Global Index 2021 Executive Summary, 1 July 2021
² ShareAction, Tracking for Health: 2021 update, 19 July 2021
³ Share Action, Unilever sets precedent on healthier food standards but more remains to be done, 28 October 2022
⁴ Unilever, Unilever to set new benchmark for Healthy Nutrition, 7 March 2022
⁵ FAIRR, Alternative Proteins Framework, accessed 11 November 2022: https://www.fairr.org/research/alternative-proteins-framework/