Food for Thought

Prevention better than cure as investors explore health and nutrition-related risks and impacts.

Living in a net zero world means people have to adapt to a more sustainable diet. Ideally, this will include consuming fewer animal-based products and chemically-enhanced meals, as well as utilising a more balanced share of protein resources.

“Like climate change and biodiversity loss, poor health poses a systemic risk that many investors cannot diversify away from,” says Jessica Attard, Head of Health Programme Development at NGO ShareAction.

Health-related risks stemming from today’s food system cause many ill-effects. For example, poor worker health is estimated to cost US employers US$575 billion a year in lost productivity – around US$3,900 per employee.

The symptoms vary. As noted in recent research by the World Benchmarking Alliance (WBA), one in ten people around the world are currently undernourished, with one-third of the global population unable to afford a healthy diet, and one in four people considered overweight. The health-related costs of the global food system, including obesity, pesticides and anti-microbial resistance, amount to US$6.6 trillion, a separate study by the Food and Land Use Coalition warned.

Food and agriculture companies are being scrutinised by investors as society becomes more conscious of the far-reaching and complex issues around nutrition and health.

Research by ShareAction noted that the revenues of global food and drinks manufacturers rely heavily on unhealthy products, accounting for more than 70% of the UK sales of 16 of the world’s biggest players.

A cattle farm in Michigan recently came under fire for selling beef containing dangerous levels of perfluoroalkyl and polyfluoroalkyl substances (PFAS), which were likely transmitted through sewage sludge used as fertiliser. These manufactured chemicals can cause health issues such as liver damage, decreased fertility, obesity and cancer.

Following the outbreak of Covid-19, there have been further concerns that environmental degradation (such as deforestation) caused partly by food and agriculture companies may lead to further zoonotic disease-driven pandemics, says Dr Helena Wright, Policy Director at the FAIRR Initiative.

“The crowded, high-stress conditions in animal agriculture foster an ideal breeding ground for new emerging diseases,” she tells ESG Investor.

A recent FAIRR report benchmarked listed meat, fish and dairy producers against its Emerging Disease Risk Ranking, noting that 63% of companies are high risk, scoring poorly across a set of seven criteria for preventing future zoonotic diseases.

Despite the worrying statistics, health and nutrition are not as highly prioritised by investors as other sustainability-related issues, like climate change, experts say.

This has “allowed companies to overlook their impact” and provide limited health-related disclosures, a ShareAction report said.

As well as fulfilling the moral objective of improving the overall health and wellbeing of the global population, investors focused on health and nutrition can benefit financially from funnelling capital to investments aligned with UN Sustainable Development Goal (SDG) 3.

Better health could add US$12 trillion to global GDP by 2040, according to management consultancy firm McKinsey.

This is a powerful incentive to investors to upscale healthy and nutritional alternatives to our current global food system.

Reading the fine print

Without transparent, comparable and quality health and nutrition-related disclosures from companies, investors will struggle to measure the real-world impact of their investments.

“But corporate disclosure on health lags behind climate and presents a challenge for investors to compare health impacts and efforts across their portfolios,” says Attard.

Last year, the WBA ranked 350 of the world’s most influential food and agriculture companies on their contributions to transitioning to a sustainable global food system.

It found that 80% of companies are failing to provide evidence of improving the accessibility and affordability of nutritious foods, with only 12 out of 233 companies setting targets to increase the proportion of healthy food options they provide. Further, only 19 out of 54 companies active in the agricultural input segment (machinery, seeds and fertilisers) publicly acknowledge their role in tackling malnutrition, with just ten disclosing how they support the production of nutritious foods. Of the 86 food retailers and restaurants assessed, 71 are not yet providing evidence of responsible marketing policies and commercial activities to promote healthy food options.

ShareAction interviewed and surveyed over 40 UK and international asset managers and asset owners to understand how they protect and promote health through their investments. The report noted limited awareness of the factors that contribute to human health, with investors largely focusing on healthcare and pharmaceuticals.

Health and nutrition-related risks are typically assessed at a company rather than portfolio level, the ShareAction report added, meaning “macroeconomic and cumulative risk may not be factored in”. Poor corporate disclosures on health also means data providers “often omit health data from their indexes”, the NGO said.

Health-themed funds run the risk of failing to drive real world impact if investors “only consider the risks that health issues pose to the company, rather than also looking at the risks their investee companies pose to people’s health”, warns Attard.

Gordon Darling, Director of Redefining Value for the World Business Council for Sustainable Development (WBCSD), says health-related factors “are not so easily quantifiable” compared to measuring carbon emissions.

“We’re not seeing as much traction on health and other social areas because measurement and disclosure still haven’t reached the same level of clarity, comparability and transparency,” he says.

Investors are pushing for this to change.

Led by Rathbone Greenbank Investments, a group of investors sent a letter to the UK government in support of the National Food Strategy’s recommendation to introduce mandatory reporting of nutrition and sustainability metrics for food companies.

“While there are examples of good practice in individual [nutrition and health] disclosures, a lack of common metrics means investors are often limited in our ability to direct capital toward the companies which are taking a proactive and leading approach to sustainability issues,” said Sophie Lawrence, Senior Ethical, Sustainable and Impact Researcher at Rathbone Greenbank Investments.


Investors are working collaboratively with each other and NGOs to both improve the quantity and quality of corporate disclosures on health and nutrition and ensure companies are taking these factors into greater account.

ShareAction’s Healthy Markets initiative aims to engage retailers, manufacturers and investors on mitigating regulatory and other health-related risks by growing their proportion of sales from healthier products.

The framework categorises health-related issues in the same way as CO2 emissions. Companies are being asked to disclose across Scope 1 (worker health), Scope 2 (consumer health) and Scope 3 (community health).

The Access to Nutrition Initiative (ATNI) has developed and published Investor Expectations on Nutrition, Diets and Health in consultation with institutional investors. These are designed to spur greater investor engagement with companies on global nutritional and health challenges and their relevant contributions to the SDGs. They include companies assigning board responsibility for implementing the nutrition strategy and linking executive remuneration to health-related targets.

Last year, 53 institutional investor members of ATNI, managing US$12.4 trillion in assets, pledged to tackle global nutrition challenges and called on food and beverage companies to prioritise better nutrition outcomes. They will be engaging with the 20 listed companies in the ATNI Global Index, such as consumer goods company Unilever. The investor coalition, including PIMCO and UBS Asset Management, has further called on policymakers to use regulatory measures to better support the nutrition targets laid out by the World Health Organisation.

Engagement continues to be a powerful tool for investors across a range of food system risks.

“FAIRR has facilitated successful investor engagements leading to progress in areas from anti-microbial resistance to diversification into sustainable alternative proteins,” says Wright. For example, in 2016 the initiative launched an engagement effort with 20 global restaurant chains, including McDonald’s and Burger King, asking them to implement policies to reduce antibiotics use in their food. By the end of 2019, all 20 firms had introduced policies to this effect.

More recently, the EU took action and banned preventative antibiotics in farming.

Last year, supermarket group Tesco agreed to increase its healthy food options from across Europe and the UK following a shareholder resolution led by ShareAction and backed by institutional investors such as Robeco and J O Hambro. Tesco must now increase sales of healthy products from 58% to 65% of total sales in its UK and Irish stores by 2025. ShareAction kept the resolution filed until the supermarket agreed to extend this commitment to its central European stores and Booker, its wholesale subsidiary that supplies other supermarket chains Budgens and Londis.

Attard points to a more recent resolution ShareAction coordinated at Unilever, calling on the company to set also set a meaningful target to grow their proportion of sales of healthier foods.

A bountiful feast

Appetite for health-linked funds is increasing, according to the ShareAction report. An increasing number are providing inroads to companies supporting the world’s transition to a more sustainable, healthy planet.

“It’s so important for investors to focus on companies offering preventative solutions to poor health and nutrition, as opposed to investments on the treatment side – pharmaceuticals and healthcare,” says Jasveet Brar, Fund Manager of M&G’s Better Health Solutions fund, which invests in companies providing sustainable solutions contributing to overall wellbeing.

One of the fund’s investee companies is The Gym Group, which publicly outlines how it is aligning with a number of health-related SDGs. M&G also invests in Dutch health, nutrition and materials company DSM, which manufactures probiotics, enzymes and vitamins to help both people and animals fortify their nutritional content.

But measuring the real-world impact of these investments isn’t easy. “We can measure the positive impact of The Gym Group based on how many memberships it has sold, for example,” Brar tells ESG Investor. “But it becomes far more difficult when attempting to holistically measure other positive externalities. How is The Gym Group reducing obesity levels or contributing to an individual’s mental wellbeing?” he adds.

Last year, Credit Suisse and JP Morgan Asset and Wealth Management announced a partnership focused on the development of an investment strategy targeting companies addressing the ties between nutrition, health, biodiversity and climate, resulting in the Credit Suisse JPMorgan Sustainable Nutrition fund. Aligning with SDG 3, it targets small and mid-cap companies across the food value chain providing innovative solutions to nutrition-related issues, including vertical farming, plant-based proteins and food testing.

Other funds, such as the Sarasin Food and Agricultural Opportunities fund and BlackRock’s BGF Nutrition fund are investing in companies actively combating global sustainability challenges in nutrition.

“We believe that an active approach [towards health and nutrition] can help navigate this evolving landscape and capture the outsized value generated by companies on the ‘winning side’,” says Rob Powell, Head of Thematic and Sector Product Strategy at BlackRock.

FAIRR’s Wright sees supporting the food industry’s efforts at protein diversification as key.

“Plant-based proteins, pulses and grains, or synthetic meat substitutes can help address many of the existing risks associated with animal protein,” she notes. Private investment into alternative protein hit US$4.9 billion in 2021, up from US$3.1 billion in 2020.

Beyond Meat is a notable example of a company utilising plant-based products to sell animal protein alternatives.

Nevertheless, ShareAction’s Attard believes asset managers have barely begun to reap the rewards from responding to growing asset owner demand.

“We know there’s huge opportunity for innovative solutions to improving population health, and we want to see funds that both capitalise on this as well as mitigate and reduce the negative health impacts caused by some companies,” she says.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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