Commentary

The Investor Case for Health and Nutrition

Sophie Lawrence, Stewardship and Engagement Lead at Rathbone Greenbank Investments, calls for mandatory reporting on financially material health and nutrition-related risks and opportunities.

There is a compelling and growing business case for investors to be looking at health and nutrition. As well as the moral imperative, there are the financially material risks and opportunities that responsible investors need to manage effectively on behalf of clients, such as the mounting economic cost of diet-related diseases which can have direct and indirect risks for company bottom lines. 

In response to financially unsustainable health trends, we expect regulatory action from governments in the UK and globally to continue to rise – albeit with a delay in the UK where recently planned regulation to restrict the promotion of products high in sugar, salt and fat was postponed, and the salt and sugar tax dismissed in the government’s June response to the National Food Strategy. 

There is also a reputational risk for companies whose approach is deemed to be insufficient by customers and stakeholders. 

We also need to consider the systemic risks. The negative long-term impacts on the workforce and economic growth from poor health can have a serious impact. These risks need to be dealt with at the national or regional level as no single company can insulate itself from these far-reaching impacts. 

As well as risks, there are also opportunities brought on by higher demand for affordable, healthy foods and changing dietary preferences, including the system-wide opportunity to improve health, with resulting enhanced productivity of the workforce and corresponding positive impact on global GDP. 

So, we have the risks and opportunities, but let’s not forget the moral and social imperative to act. Unhealthy diets also have a significant impact on individual health and our already struggling health systems. 

Taking action 

Asset owners and managers, including Rathbone Greenbank, have responded via a number of collaborative initiatives focused on health and nutrition.  

These include the development of the Access to Nutrition Index since 2014, which focuses on developing tools and data that track and drive the contribution made by the food and beverage sector to addressing the world’s global nutritional challenges. 

We also co-developed the investor expectations on sugar, obesity and non-communicable diseases in the same year, outlining the five core principles for companies to follow. And, more recently, we have been working with the Food Foundation and their ‘Plating up Progress Initiative’, which focuses on standardising nutrition and environmental disclosures from companies in the food sector. We have also been an active member and an adviser to ShareAction’s ‘Healthy Market’s Initiative’, which is particularly focused on tackling childhood obesity in the UK. The initiative also supports collective investor engagement, and it led the recent nutrition-related shareholder resolutions at Tesco and Unilever, which were successful in pushing for more ambitious health and nutrition strategies. 

We have seen incremental improvements in disclosure and encouraging signs that some companies are moving in the right direction, led by retailers. Sixty percent of the UK grocery market has now made commitments to increase healthier sales across at least some of their products. That is an increase of 15% since ShareAction’s Healthy Markets engagement programme began its focussed dialogue with retailers. 

Health has traditionally not been well understood or prioritised as a stewardship theme by investors, but this is fast changing. Between 2019 and 2022 alone, the signatory base of the Access to Nutrition Initiative grew significantly from US$7 trillion in assets under management to now representing over US$19.2 trillion. 

Engaging with policymakers 

But there is still much further to go. A key issue for investors is comparability as there is a notable lack of consistency or standardisation in how information on this issue is being reported. We ultimately end up comparing apples to oranges. Mandatory reporting would ensure that we had a level playing field for companies and it would allow investors to accurately understand what progress is being made. 

To try to address this issue, investors have stepped up their policy engagement work. 

The National Food Strategy was released in 2021 and it included a recommendation that mandatory reporting requirements should be introduced for large companies in the food sector to report on their products, sales and food waste; voluntary reporting was not sufficient. 

To ensure the investor voice was heard in support of this recommendation, Rathbone Greenbank held an investor briefing with the National Food Strategy Team in 2021 ahead of the strategy’s publication. Given investors’ interest in this briefing, we then put together an investor letter outlining our support for the mandatory reporting recommendation and what we saw as the key risks facing the food sector, and how these could be addressed by targeted regulation. This was sent to the Prime Minister, as well as the Secretaries of State for Department for Environment, Food and Rural Affairs (DEFRA) and the Department of Health and Social Care (DHSC). The investor coalition in support of this letter now has 23 signatories representing over £6 trillion in assets under management or under advice. 

We received a positive response from Minister Victoria Prentis within DEFRA in mid-January 2022, acknowledging that the investor perspective would be crucial in helping DEFRA better understand how mandatory reporting could incentivise positive behaviour change amongst businesses, as well as how regulation would work best for both companies and investors. Since the initial response to our letter, the Investor Coalition on UK Food Policy, as the group is now known, has had a regular dialogue between DEFRA and DHSC officials as well as a meeting with Minister Prentis to share the investor case for mandatory reporting. 

We were pleased to see a commitment to explore mandatory reporting remain in the recent National Food Strategy response from the Government, following our dialogue with government officials, as well as a commitment to establish a multi-stakeholder Food Data Transparency Partnership to agree what data should be reported. Investors will be a part of this. We are proud of the role that the Investor Coalition on UK Food Policy has played in keeping this measure on the agenda and the fact that investors are now seen as a valued stakeholder group. 

The success of this initiative is an example of how collaboration can create faster and greater impact. Rathbone Greenbank has worked closely with the Food Foundation, Guy’s and St Thomas’ Foundation and a close group of investors throughout. The hard work doesn’t stop here and we will continue to push for government to be bold and ambitious in the coming months. 

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