Against the backdrop of a Trump-led backlash against ESG, insiders warn food industry investments are under threat from a cocktail of environmental risks. By Nick Hughes.
It reads like a cry for help. A memo, published anonymously earlier this month by a group of food industry insiders, warns of a sector-wide failure to tackle a series of interconnected crises – from extreme weather events to water scarcity – that threaten the future viability of their businesses.
“[….] we have reached a moment of threat to food security like none other we have seen,” they warn in the memo published on the group’s behalf by Inside Track, an organisation that uses inside knowledge to push critical industries towards a just transition. “Yield, quality and predictability of supply from many of our most critical sourcing regions is not something we will be able to rely upon over the coming years.”
Such is the rate at which these kinds of warnings emanate from within the NGO community they risk losing some of their capacity to shock. But coming as it does from inside the food industry ‘tent’ this memo carries a genuine sense of urgency.
Most of the whistle-blowers have decades of experience and hold or have held senior professional roles across a range of functions in UK food businesses. They are working within a system they believe is near critically compromised with significant commercial and societal implications for the future.
The memo is addressed to the directors, owners and creditors of their businesses as well as to investors. This last cohort has been under the spotlight in recent months following the return of Donald Trump to the White House. We now find ourselves in a situation where the man in charge of the world’s largest economy is not just sceptical of the need to tackle climate change, but openly hostile to the very notion of corporate responsibility, including climate action.
What this has done in effect is give tacit permission (if they needed it) to the US investment community to water down or retreat entirely from a sustainability agenda without fear of political reproach. Some have wasted little time in letting the mask slip: several US banks including Goldman Sachs and Morgan Stanley have withdrawn from the ‘Net zero banking alliance’ which works to get banks to commit to net-zero by 2050 and set decarbonisation targets, while the ‘Net-zero asset managers’ initiative’ announced a suspension of its activities in January.
The European response has been more circumspect to-date yet we are already seeing signs of ripple effects in the downgrading of the priority given to tackling environmental risk. BP, for example, has abandoned its pivot to green energy and refocused its business strategy around fossil fuels. Elsewhere, the scope of the EU’s Corporate Sustainability Reporting Directive (CSRD) has been significantly diluted as part of a European Commission drive to minimise the regulatory burden on businesses.
The industry memo should serve as a warning to all – including regulators, businesses and asset managers – who plan to take their foot off the ESG pedal. The subtext is that investors in particular are having the wool pulled over their eyes by company reporting that ignores and underplays systemic risk.
But is softening of sentiment towards ESG investment something we should be genuinely fearful of, or is there a risk in overstating a trend based on a few knee-jerk reactions?
Nuanced position
The NGO ShareAction works with investors to hold businesses accountable for their social and environmental impact. Garance Boullenger, who leads the NGO’s healthy markets initiative, admits the US-led backlash against ESG makes this a tricky environment for responsible investors to navigate – “being a responsible steward today has become way more challenging in general […] whatever the topic investors want to engage companies with,” she says.
Yet Boullenger suggests there are nuances that are not accounted for within a general narrative that responsible investment is in retreat. For health and nutrition, for example, she says momentum for businesses to be transparent about their impact and exposure to future risk – linked to regulation, litigation and changing dietary habits for example – is “stronger than ever”, in part because the topic is less politically polarising compared with climate change.
“Data that is pointing to the extent of the global obesity crisis and the cost to the economy is piling up,” she explains. Companies that rely on unhealthy foods for their profits will be increasingly exposed to financial risks – and shareholders at risk of lower returns – if they don’t shift the balance of their sales towards healthier alternatives.
ShareAction recently launched a new set of investor asks specifically targeted at the eating out of home sector. It wants to see greater ambition from fast food chains, restaurants, cafés and other out of home venues on nutritional quality and is calling for businesses to start publishing annual sales-based data on the healthiness of their products and commit to improving this over time.
Investors, including one of Europe’s largest asset managers Legal & General, are engaging more and more with companies on these topics, says Boullenger, “not only as part of our work, but also on their own [….] in earning calls and during annual general meetings”.
She concedes this hasn’t yet reached a critical mass of investors, although those signed up to ShareAction’s ‘Long-term investors in people’s health’ coalition now total more than 50 investors with over £3.9trn (US$5trn) of assets under management.
Crisis, what crisis?
If the long-term direction of travel is set on health and nutrition then what about climate? Even before the arrival of Trump as president, evidence suggests a shift in investor sentiment was occurring. Research from ShareAction published in February showed that support for shareholder resolutions aimed at tackling social and environmental issues crashed to a new low in 2024 with only 1.4% (4 out of 279) of the shareholder proposals receiving majority support, down from 21% in 2021. Among those who voted against shareholder resolutions were the four largest asset managers in the world – BlackRock, Fidelity Investments, State Street Global Advisors and Vanguard with a combined £17.8trn in assets. On climate change specifically, only 2 out of 73 shareholder resolutions received enough support to pass.
Look closer to home, however, and there are signs that investor concerns over climate are resilient to a change in the political weather. In March, a coalition of UK asset owners led by The People’s Pension, Brunel Pension Partnership and Scottish Widows representing around £1.16trn in pension savings, co-authored a statement calling on asset managers to evolve and strengthen their climate stewardship strategies in light of the urgent need for climate action.
Green bonds
There is evidence too of ongoing demand for financial products that support business’s green ambitions. In the summer of 2022, the catering giant Compass Group claimed a sector first after two sustainable bonds, worth £437m and £250m respectively, were listed on the London Stock Exchange main market. The business has since gone back to the market for more and by the end of September last year had issued a total of £1.78bn of sustainable bonds.
At the time of the first bond issue, Compass Group’s global director of sustainability Amy Keister told Footprint that sustainable financing was a crucial part of Compass’s overall strategy in support of its 2050 net-zero goal. She noted how projects that could qualify for funding might include innovations in food waste management and investment in regenerative food production.
To-date, all allocated funds have gone towards purchasing ethically and sustainably sourced products, ranging from those certified as Fairtrade to purchases of plant-based products and products from minority or women-owned suppliers.
It doesn’t, on the face of it, give the appearance of finance being deployed in a transformational way for the green economy. However, a source from the NGO world with experience of working within food businesses says allocating green finance in this way helps sustainability teams become more relevant both to their commercial colleagues and to the CEO, and thus is an important stepping stone to capital being deployed to more sustainable ends.
Yet the issuing of green bonds remains a niche activity within the food sector and is likely to remain so if investors retreat further from an ESG agenda.
As the whistle-blowers’ memo summarises so powerfully – time is not on our side. The group of industry insiders is clear that theirs is not a divestment campaign, but they do want investors to ask searching questions in order to test their own confidence in the security of their investments.
“The risk is that we are entering a policy environment where companies are stepping back from rather than into the kind of action that is needed to secure their resilience,” the memo states.
Investors have the power to change that. Now more than ever they need to make their presence felt.
Leave a Reply