Nestlé investors warn of ‘systemic risks’ from unhealthy foods

A group of institutional investors in Nestlé has increased pressure on the world’s largest food company to become less reliant on unhealthy products and warned that consumers’ overconsumption of packaged goods with limited nutritional value poses “systemic risks” to financial returns.

Shareholders with more than $3tn in combined assets under management are calling on the Switzerland-based group to set a target to increase the proportion of its revenues from healthier foods and drinks. Ahead of Nestlé’s annual general meeting in Lausanne on Thursday, they said they were prepared to “escalate” the matter unless directors addressed their concerns.

The public statement, co-ordinated by responsible investment charity ShareAction and signed by institutions including Legal & General Investment Management and several public pension funds, is the latest initiative in a long-running campaign among concerned shareholders to push food companies to make their products more nutritious.

Several governments have introduced taxes on high-sugar products and restrictions on advertising as the industry comes under increased scrutiny over the extent to which it contributes to global obesity.

The investors’ intervention comes even as Nestlé, whose confectionery brands include KitKat, Milkybar and Smarties, has recently become more open about the nutritional value of its product line-up.

The statement — whose signatories include EOS at Federated Hermes, which acts on behalf of clients on environmental, social and governance matters and advises them on voting at AGMs — is also in spite of the company’s commitment to publish a target for increased sales of healthier fare.

The group said it was calling for Nestlé — whose portfolio also spans Cheerios cereal, Maggi noodles and Buitoni pasta — to specify a target for the proportion of its revenues from healthier foods, whereas the company said the goal would be to increase sales of such products in absolute terms.

Nestlé, which said it had “set a new standard in corporate transparency” across the industry, last month disclosed that less than half of its portfolio of mainstream products could be considered “healthy”, using a commonly accepted definition.

Mark Schneider, chief executive, said Nestlé had made progress in reducing sodium, sugar and saturated fats. However, he also indicated there were limits to how far the company could push healthier alternatives and that treats such as chocolate were not meant to be healthy.

While the coalition of investors said it welcomed the increased disclosure from Nestlé, it added that supermarkets were “flooded with less healthy foods, causing significant harm to population health”, and that this created “systemic risks to investor returns”.

The investors said they wanted to work “constructively” with the board, but added they were willing “to escalate our engagement” if the company failed to provide the necessary assurances.

“They have fallen short of setting a target in the way we wanted them to,” said Jessica Attard, programme director at ShareAction. “Nestlé’s responses to many of our questions have been quite poor.”

She added that a shareholder resolution to increase pressure on Nestlé had been “on the table” for the AGM year, but “we agreed to delay, on the basis that Nestlé have agreed to continue to engage with us”.

Nestlé said: “We are the first company to report on the nutritional value of our entire global portfolio against a single externally recognised, nutrient profiling scheme.

“We are determined to maintain our industry leadership in nutrition: Nestlé topped the Global Access to Nutrition Index in 2021 and 2018 and ranked first in the nutrition measurement area of the World Benchmarking Alliance.”