Shareholder coalitions say the power of investor money can be harnessed to press the food industry to provide more nutritional foods and still improve the companies’ bottom lines.
But it could take years for nutrition to climb the priority list for many investors despite the spotlight a September White House conference on hunger, nutrition and health placed on the role nutritious foods can play in preventing or moderating diet-related conditions such as obesity, hypertension and Type 2 diabetes.
The conference didn’t result in the administration calling for more food regulation. But nutrition advocates say they still hope to get corporations to change because of investor pressure — a project that is analogous to one taking place over corporate behavior on environmental, social and governance issues.
“The government is not going to be able to regulate fast enough,” said Greg S. Garrett, the executive director of the Access to Nutrition Initiative, or ATNI, a group that monitors the nutritional content of food and beverage products. “There are lots of issues there. What we can do with our data is give it to investors, and investors can put the pressure back on these companies.”
ATNI issued a review on Oct. 17 of 11 major U.S. food and beverage manufacturers saying the companies had made limited progress since 2018 in meeting commitments to improve the nutritional content of their product lines. The assessment looked at just over 11,000 products.
Garrett said in an interview that the review provides information for 81 institutional investment firms, including the Interfaith Center on Corporate Responsibility, that have pledged to advance policies for more nutritional food supplies. He said the firms have $19.2 trillion in assets under management. The
Netherlands-based ATNI’s funders include the Bill and Melinda Gates Foundation and the Robert Wood Johnson Foundation.
T. Rowe Price, a publicly owned global investment management fund, is one of the 81 firms.
“Becoming a signatory to the Access to Nutrition Initiative provides us with useful research in the specialized field of nutrition, along with details on the strategies of food companies across a range of nutrition elements,” a T. Rowe Price spokesman said via email. “This helps us determine if companies are on the right side of regulatory/governmental guidelines and consumer preferences.”
The spokesman said the firm has not gotten many client questions on nutrition, but it believes integrating the information into its research makes financial sense.
Shareholder efforts to build momentum on nutrition could be slowed by a lack of agreement on a definition of a healthy food product and reliance on profiling systems that measure those products differently. The global focus on climate change may also be adding to the urgency behind ESG investing. Asset managers globally are expected to increase ESG-related assets under management to $33 trillion by 2026 from $18.4 trillion in 2021, according to PricewaterhouseCoopers.
Apples and oranges comparisons
“It would be much easier for investors if there was one nutrient profiling system against which all the companies are compared,” said Meg Jones-Monteiro, senior program director for health equity for the Interfaith Center on Corporate Responsibility. “It makes it harder for investors to compare how one company is doing versus another when the measures are not even the same.”
The center’s members include pension funds, faith-based organizations, asset managers and foundations with $4 trillion in managed assets. Food and nutrition fall under health equity at the center, and investors follow food manufacturers, food retailers and casual restaurant chains.
Jones-Monteiro said investor members of the interfaith center interested in food issues find assessments by ATNI useful.
ATNI’s review found that 70 percent of the 11,000 products reviewed had higher levels of salt, sugar and fat and not enough fiber, whole grains or other nutrition-rich ingredients. The products scored low on the Health Star Rating, a system that uses an algorithm to grade packaged foods and beverages on their nutritional content. The Australian and New Zealand governments developed the system.
The report also looked at marketing practices, labeling, support for workforce nutrition programs, accessibility and lobbying and outreach on public health issues. Unilever had the highest score across all categories and Coca-Cola the lowest.
Kellogg Co., which placed second overall in the ATNI report, said it voluntarily participated in the review and other benchmarking efforts because it “has a long-held commitment to transparency and advocacy as part of our Better Days Promise ESG strategy.” The company, known for its cereal brands and other products, noted in a statement that it had moved from fifth in 2018 to second this year.
Garrett said the companies in the report have laid the groundwork for progress in governance statements and nutrition strategies that should result in nutritionally better products over time.
He said ShareAction, a group that promotes what it calls responsible investment, and its Healthy Markets Initiative in Europe used similar findings from ATNI to reach an agreement with Unilever this year. The global food company will publicly report results of comparisons between its product line and its internal rating system and at least six nutrition profile models endorsed by several governments. The report will be released in the U.S. and 15 other markets where Unilever sells products.
Garrett attributed Unilever’s decision to shareholder action and a strong European regulatory system.
“We want to see that same kind of action in the U.S.,” Garrett said. “I think we’re seeing that nutrition is now becoming a material topic for investors. They see it as something that if companies will put more nutritious foods on the market, it’s good for business, for society, for public health.”
ESG advocates have been able to measure their success in part by the number of items they can put on the corporate agenda. Shareholder proposals for the 2022 proxy season focused on climate change, the right to call special meetings, anti-discrimination and diversity, an independent board chair, and lobbying spending and political contributions, according to a review by attorneys in Gibson Dunn & Crutcher LLP’s securities, regulation and corporate governance practice.
Danielle Fugere, president and chief counsel for shareholder advocacy group As You Sow, said large companies can take years to make changes even with shareholder pressure.
As You Sow focuses on environmental and climate issues but has waged investor campaigns or gone to court on several food-related issues. The nonprofit group and the National Confectioners Association released a report in August identifying growing and harvesting conditions for cacao beans that led to toxic heavy metals lead and cadmium in chocolate.
The investigation was the outgrowth of a settlement As You Sow reached with 31 companies in 2018 after suing several of them for not warning consumers about the metals under California law requiring businesses to provide warnings about significant exposure to chemicals that cause cancer, birth defects or other reproductive harm.
Fugere said work continues with the chocolate industry about how to address the metal levels and that the courts were a better tool than the shareholder process in that case.
“Shareholder resolutions take time. Part of what they are intended to do is to raise issues and concerns to shareholders, to companies and to boards of directors,” Fugere said. “Changes occur incrementally because you’re dealing with large companies. They don’t make changes overnight. There really has to be a case made that this is a compelling issue and that it is having negative impacts.”
Garrett said the U.S. food industry has successfully argued for less government regulation because of voluntary self-regulation. Ahead of the White House conference, segments of the food industry said companies had made progress and that there was no need for new regulations. The Biden administration seems to have listened and has not announced plans to pursue mandates.
“This idea of self-regulation is all good and fine, but if you don’t have either government pressure or investor pressure or consumer demand, it’s not going to happen,” Garrett said.
More than philanthropy
Jones-Monteiro of the Interfaith Center on Corporate Responsibility said food companies’ commitments at the White House hunger conference fell largely along philanthropic lines such as pledging to donate food to food banks. That’s not enough, she said.
“You need to rethink your business model, not just say we’re going to continue to push bad products out on consumers, but on the philanthropic side we’ll give to food pantries. That’s not what we as investors are looking for. We are looking at long-term value creation for shareholders and understanding how that impacts people and the planet,” Jones-Monteiro said.
Consumers’ growing interest in the connection between nutrition and health may be an incentive to food manufacturers to reformulate products.
“I think some companies recognize from a business perspective they do have to change and adapt because their consumer base is demanding more than perhaps they have before,” Jones-Monteiro said, acknowledging that investors are giving more attention to climate. “I think that nutrition falls into the broader category of health and that’s a little bit harder for some investors to understand.”