February 3, 2023

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Big food’s unhealthy products leave bitter taste for ESG investors

2 min read

John Harvey Kellogg and his younger brother William invented one of the first breakfast cereals in the 1890s as a health food to aid digestion, but John was furious when William created a version with added sugar.

More than a century later, William’s company, now known as Kellogg, is still at the centre of a conflict between flavour and health. As governments and investors press food companies including Kellogg to make their products more nutritious, the US group has in turn taken legal action against the UK government over an attempt to restrict marketing of some of its cereals because of their sugar content.

The lawsuit is the latest sign of the tensions as governments and investors seek to address a global obesity problem that has been exacerbated by the Covid-19 crisis, even as inflation squeezes consumers’ wallets and intensifies foodmakers’ battle for market share.

“For shareholders like LGIM, nutrition and in particular obesity have become systemic risks for companies we hold across multiple sectors,” said Maria Larsson Ortino, global environmental, social and governance (ESG) manager at Legal and General Investment Management, one of Europe’s largest asset managers.

“We are actively engaging with those companies that have high revenue exposure to unhealthy products, as we believe they are likely to face the dual headwinds of increasing regulation and limitations on marketing of unhealthy foods.”

Nutrition has climbed the agenda as investors interpret ESG principles more broadly, moving beyond climate to social problems, said Bruno Monteyne, an analyst at Bernstein.

Obesity has almost tripled since 1975 and packaged and “ultra-processed” foods have received a large slice of the blame. US-based public health group Vital Strategies last year called for tobacco-style warnings on the health risks of highly processed foods. Chile has already introduced black warning labels shaped like stop signs on packaged foods and drinks high in sugar, salt…

2022-06-04 09:00:45

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