Asset managers including Legal & General Investment Management (LGIM) and Candriam have filed a shareholder resolution challenging high-profile chocolate brand Nestlé to improve its impact on people’s health.
The coalition of shareholders, representing $1.7trn in assets and led by ShareAction, said they have been “left with no option” but to bring forward a resolution as the world’s biggest food company has not set out targets to reduce its reliance on unhealthy foods.
“Nestlé has an enormous influence on billions of people’s diets and lives through the products it makes, advertises and sells to us,” said Catherine Howarth, chief executive at ShareAction.
“While the company claims in its mission statement that its products have ‘the power to enhance lives’, in reality three quarters of Nestlé’s global sales are unhealthy products containing high levels of salt, sugar and fats.
“As Nestlé has consistently failed to set out how it will shift the balance of its sales towards healthier food options, concerned investors have been left with no option but to bring forward a resolution at the company’s AGM in April.
“Any move away from sales of unhealthy products by Nestlé will inevitably support healthier communities all over the world and in the long term help economies too.”
Little progress after fund manager engagement
Last April, a group of 26 investors, including EQ Investors, Castlefield Investment Partners and LGIM, wrote to Nestlé ahead of its AGM calling on it to commit to setting targets to improve its impact on population health, urging the company “to grasp the opportunity to stay ahead of food-related regulation and evolving consumer expectations”.
In September, Nestlé released new nutrition targets but the investors said it has fallen short of these; first, they said the nutrition sales target is simply in line with the food giant’s overall expected growth and makes no commitment around the sales of unhealthy products, which could increase at a similar rate.
Second, the targets included products such as coffee, which has no nutritional value; this means Nestlé could achieve its health target by simply selling more coffee.
The shareholders are urging Nestlé to set further targets to increase its sales from healthier products or face regulatory, reputational and legal risks due its impact on public health.
Maria Larsson Ortino, senior global ESG Manager at LGIM, commented: “Following Nestlé’s health target announced last year, we publicly noted that we were disappointed the company had not taken the opportunity to set a specific, measurable and proportional target to increase sales from products that meet healthy thresholds.
“Since the publication of the target, we have had additional engagements with Nestlé but consider the dialogue to have come to an impasse. We therefore deemed the next appropriate step to be to co-file this shareholder proposal. We want to press home to the company, and to the food and beverage sector as a whole, the importance we place on nutrition.”
The World Health Organisation has reported unhealthy diets are a key factor behind the global growth in rates of obesity, increasing the risk of diabetes, heart disease, stroke and some cancers – it is estimated to cost the global economy $4.3trn a year by 2035.
“There is a clear link between a poor diet and chronic health conditions, such as obesity, heart disease and diabetes,” added Larsson Ortino. “As a long-term investor, LGIM believes healthcare costs and decreased productivity have significant negative consequences on our clients’ assets across multiple sectors.”
The resolution will be voted on at the Nestlé AGM on 18 April. Other investors in the coalition include La Francais Asset Management, VGZ and Guys and St Thomas’s Foundation.
