The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.
Past performance should not be seen as an indication of future performance.
Screening out sectors or companies may result in less diversification and hence more volatility in investment values.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any stocks or products that may be mentioned.
- The growing global population is driving demand for protein, increasing the impact of the global food industry on workers and the environment
- Alternative protein sources are gaining more and more traction, but some major food producers are lagging in keeping up with this trend
- Many food companies already have sustainability strategies and targets in place, but investor engagement can help to identify gaps and challenges and take these best practices to companies that have less well-developed approaches
Initiatives such as Veganuary and meat-free Mondays are a sign of how patterns of food consumption are changing. People are increasingly aware that their eating habits can come with dramatic environmental and social costs. As investors, we are particularly interested in how companies are managing ESG risks in both their operations and supply chains, as well as whether they are seeking opportunities in high-growth areas such as vegan protein.
We have been engaging on sustainable food systems for a while, focusing on nutrition, water risk and labour aspects before. For the next three years, we will seek to drive change in some of the world’s largest food producers, traders and retailers, promoting best practices which will help them to meet growing food demand whilst halting runaway environmental degradation. This will help stabilise the climate, improve overall risk and opportunity management, and drive enhanced returns to investors and a wide range of stakeholders.
Globally, we are addressing retailers, traders, producers, banks, as well as consumer goods companies.
We will also align our efforts with various collaborative engagement initiatives. This includes the Principles for Responsible Investment’s working group on sustainable forests, with a focus on cattle and soy production; the investor initiative FAIRR (Farm Animal Investment Risk and Return) on alternative proteins; and Asia Research and Engagement (ARE) on animal protein.
We will particularly ask for:
- Comprehensive water risk assessments, including in the feed supply chains
- Wastewater management systems, including manure management plans
- Water targets; climate risk assessments, including in the feed supply chain
- Technological innovation to raise productivity and improve efficiency of resource use
- Environmental KPIs, including long-term targets aligned with the Paris climate agreement
- Evaluation of investment in development of meat substitutes risk assessments regarding emerging trends in consumer preferences, e.g. alternative proteins
- Food loss and waste reduction measurements and reduction targets
- Technological solutions to reduce food waste
Deforestation-free supply chains:
- Assessment of and transparency around deforestation risk of own operations and supply chains
- Commitment to no deforestation in own operations and supply chain
- Commitment to full traceability with clear timelines
- Thorough sustainable supply chain management system
We met with the UK retailer’s strategy director, its head of property and procurement, and global communications director. They introduced us to their new net zero emissions by 2040 strategy, which includes pillars of water and carbon management; minimising plastics in packaging and production; healthy, sustainable diets; and food waste avoidance. Each theme has a working group that reports into the Corporate Responsibility and Sustainability Board, which is chaired by the CEO. While the strategy is broad and a good – though overdue – step into the right direction, we highlighted the need to assess and disclose more details on the environmental footprints of the company’s products (scope 3 emissions), including water footprints. The company states that they acknowledge that but have challenges getting the right data. They are cooperating with an external consultant to address this.
Social aspects of food supply chains
The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.