Fund managers Rathbone Greenbank and Schroders have created an investor expectation document to support engagement with food companies on unhealthy food, especially use of sugar and on their response to the global rise in obesity and related diseases.
It comes as the UK government this week announced details of a new sugar tax on drinks with more than five grams of sugar per 100ml to fight rising obesity levels in the country.
The 10-page document outlines five core principles on which investors should engage with companies on the issue. This includes governance that routinely reviews risks from increased regulation of unhealthy food and sufficient disclosure to enable a fair comparison of performance between companies.
It follows a year-long engagement between Rathbone Greenbank and Schroders with some of the UK’s leading food and beverage producers and retailers on sugar and unhealthy food.
The attention on the risks of sugar consumption to global health is increasing with sugar taxes having been proposed by governments globally. The UK is the latest country to introduce such a tax. France, Hungary and Mexico also have similar levies on sugar.
Elly Iriving, ESG Analyst at Schroders and co-author of the engagement document, says there has been a global decline in the sale of carbonated drinks and processed and a rise in the purchase of healthier products.“This provides risks and opportunities for companies who are willing to adapt their portfolios,” she says.
The principles in the investor document have been endorsed by long-term investors, representing over £1bn in assets who have committed to use it to guide their dialogue with companies.
Speaking to RI, Matt Crossman, Engagement Manager at Rathbone Greenbank and co-author of the document, said: “We see sugar as a major issue which could hit companies’ valuations. But there is not enough information out there to understand the risks, and the information we do have is patchy, inconsistent and selectively disclosed. That’s why we started engaging across the industry to help develop a disclosure framework to take forward our engagement.”
He added that there is a risk that sugar could be the next tobacco: “There are parallels.
“Food and beverages companies reliant on sugar are already facing changing consumer trends and stringent regulation like sugar taxes – but there is major risk of future litigation around the marketing of unhealthy food.”
He said that the document has been peer reviewed with companies, academics and civil society and hopes it will catalyse the start of a consistent approach around disclosure on risks and opportunities related to sugar use and unhealthy food.
In the next phase of the work there will be direct engagement with companies identified as being most at risk.