Austria’s Erste AM engaging with Nestlé on controversial water operations

Erste Asset Management (Erste AM), a Vienna-based firm with €59.5bn in assets, says it is engaging with Swiss food and drink giant Nestlé over its controversial water operations in Pakistan and British Columbia, Canada.

Erste AM’s campaign began with the recent publication of a newsletter that called attention to the reports that Nestlé was involved in “excessive withdrawal of water” in the two regions. Erste AM said that following an initial contact on the matter, Nestlé didn’t bother to respond. “However, after the publication of our newsletter, Nestlé was happy to meet with us to discuss the issue,” said Dominik Benedikt, Senior ESG Analyst at Erste AM, adding that the meeting would take place in the next few months. In its assessment of Nestlé, Erste AM has used research from ESG firms Oekom and MSCI.

In July, it emerged that Nestlé was getting groundwater in British Columbia for free during a severe drought in the province. Starting in 2016, the provincial government will charge the Swiss firm C$2.25 (€1.55) per one million litres of groundwater taken. But a local NGO says the price is ridiculously low and unfair, given that residents have been asked to conserve water. Nestlé defended its water use, saying it was only withdrawing water from aquifers and not from rivers, lakes and streams that are currently affected by drought.

The problem in Pakistan goes back to 2012 when the documentary “Bottled Life” alleged that groundwater for a village near a Nestlé bottling factory was very low. Nestlé dismissed the documentary as “unfair” and“one-sided” and insists that it has financed projects in Pakistan to balance its water consumption there.

Asked if Erste AM would file a shareholder proposal at Nestlé for its next annual meeting should the company not satisfy its concerns, Benedikt said such an action was not currently part of the manager’s responsible investment policy. “But we do vote all of our shares,” he added. Erste AM offers eight sustainable investment funds, two environment-themed products and one microfinance fund. It is the market leader for sustainable investments, with around €4bn under management.

Meanwhile, Nestlé has confirmed that it is involved in two legal cases in the US over alleged use of child labour in the Ivory Coast to harvest cocoa. The first one is an appeal to the US Supreme Court. The appeal asks the high court to undo a lower court decision which held that three anonymous citizens of Mali had a claim against Nestlé under the US’ Alien Tort Statute (ATS). The citizens say that as children, they helped to harvest cocoa for Nestlé.

Nestlé replies that the citizens’ claim is baseless. The Swiss firm feels the same way about a separate class-action lawsuit filed in California. It told Responsible Investor: “Nestlé is taking action to eliminate child labour in our cocoa supply chain. This has involved setting up a Child Labour Remediation and Monitoring System (CLMRS) in the Ivory Coast to help identify children at risk. We have also refurbished and built schools in the country as a means of reducing the incidence of child labour.”