AUM in Action

NBIM Reduces Investor Risk with Nutrition Guidance

Engagement tool targets “growing prevalence” of obesity in children with measures addressing food retailers’ corporate strategy and promotional activities. 

Norges Bank Investment Management (NBIM) and UNICEF’s recently published guidance framework offers investors a tool to engage with food suppliers on the increasingly prevalent and “material” issues of nutrition and obesity. 

The guidance framework is the result of a two-year network collaboration with global food retailers, containing measures that can be implemented by food retailers to reduce risks and promote healthy choices for children and young people, as well as offering indicators that companies can use to enhance reporting on their efforts. 

Caroline Eriksen, Head of Corporate Governance-related Social Initiatives at NBIM, told ESG Investor that the sovereign wealth fund sees nutrition as “an increasingly material issue for investors”. 

According to data in NBIM’s guidance framework document, unhealthy diets and the ‘triple burden’ of malnutrition has an estimated impact of up to US$3.5 trillion a year. 

NBIM, the world’s largest sovereign wealth fund with US$1.3 trillion AUM, also noted the increasing importance of nutrition as an ESG issue for institutional investors, with material risks related to litigation, regulation and changing consumer preferences possessing the potential to negatively impact food company profitability, brand value and market share. 

Additionally, it highlighted the “substantial” impacts of diet-related diseases on economic growth, with productivity losses and a reduction gross domestic product cited as potential impacts on future earnings for companies and investors. 

Eriksen underlined the tool’s usefulness in understanding how companies are managing nutrition-linked issues, as well as identifying best practices, risks and opportunities.  

Adjusting promotion portions 

According to Eriksen, the aim of the guidance framework was to “make something really practical and useful that could be widely disseminated beyond the companies that were participating”. 

The tool is comprised of four core pillars: corporate strategy, product labelling and development, product availability and placement, and promotional activities.  

Corporate strategy evaluates whether food retailers explicitly incorporate nutrition and health as part of their corporate strategy, ensuring accountability through setting nutrition-related performance metrics, monitoring and reporting against those targets, and conducting due diligence. 

Product development and labelling focuses on what actions food retailers can do when it comes to their own brands, including reformulation of existing product portfolios and adjusting portion sizes. 

Promotional activity encompasses working with suppliers to incentivise the purchase of healthier foods through promotion strategies, restricting promotions for less healthy foods, and collaborating to avoid promotional techniques that encourage children to consume less healthy food. 

Working up a sweat 

In 2017, a fifth of global premature deaths were linked to dietary risk factors, with NBIM describing unhealthy diets as the “primary driver” behind obesity which according to the World Health Organisation data has almost tripled worldwide since 1975. 

The document also flagged “concern” over the “growing prevalence” of overweight and obesity among children and adolescents, which globally more than quadrupled to 18% of all children and adolescents in 2016 from 4% in 1975. 

According to Eriksen, many companies are aiming to address the “challenge of obesity”, underlining that “faced with regulatory changes, companies can “be at an advantage in the long run” if they proactively manage risks and create healthy food environments”.

“If companies are proactive and stay ahead of the curve and are prepared for regulatory changes, that’s a positive,” she said.  

“There’s a strong business case for companies to be prepared and incorporate regulatory considerations related to their product portfolios and food retail environments.” 

Eriksen reiterated the need for investors to have increased transparency on nutrition to effectively assess the actions that companies are taking in order to understand how they are responding preparing for potential regulatory changes. 

Investor action on nutrition 

Investors have called for greater transparency from companies on nutrition-related issues, including NBIM which has established expectations for companies on children’s rights that recognise that companies can positively or negatively impact them through their marketing practices and food offerings. 

Investors have attempted a number of initiatives in order to address the issue. The Access to Nutrition Initiative released the ‘Investor Expectations on Nutrition, Diets and Health’ in 2020 which outlined four key areas for investors to engage with food companies to address nutrition challenges and deliver the UN Sustainable Development Goals, with more than 80 institutional investors representing US$19.7 trillion in AuM signing the document. 

Investment management firm Rathbone Greenbank Investments – alongside NGO ShareAction and non-profit the Food Foundation – has led a coalition of investors representing £2.8 trillion (US$3.56 trillion) in AuM which urged the UK Government to demonstrate leadership and ambition in its response to the National Food Strategy’s recommendations for promoting a healthy and sustainable food system. 

Sophie Lawrence, Stewardship and Engagement Lead at Rathbone Greenbank, has previously called for mandatory reporting on financially material health and nutrition-related risks and opportunities, noting the reputational risk present for companies and negative long-term systemic risks caused by poor health and nutrition.  

Analysis by research group World Action on Salt, Sugar and Health – supported by ShareAction – found that more than 2,000 products produced and sold by Danone, Kellogg’s, Kraft Heinz, Nestlé and Unilever across Australia, France and Mexico were assessed against government-endorsed definitions of healthier food and drink. It also revealed that Australia had the highest proportion of unhealthy products (65%), followed by France (63%) and Mexico (60%). 

In April, a group of 26 investors co-ordinated by ShareAction demanded that world’s largest food and drink manufacturer Nestlé commit to setting targets to improve its impact on population health. 

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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