A coalition of institutional and retail investors have filed the first ever health-based shareholder resolution at a FTSE 100 company (^FTSE), calling on the UK’s largest food retailer to set targets to increase the amount of healthy food and drink it sells.
Tesco (TSCO.L) is in the spotlight after responsible investment NGO ShareAction co-ordinated a resolution urging the company to reduce its reliance on unhealthy products for sales growth. The proposal is being co-filed by seven institutional investors managing over £140bn ($193bn) in assets, along with 101 retail investors.
The push reflects rapidly rising investor concern about companies’ health impacts, an issue that was seen as fringe even by many advocates of responsible investing until recently.
The COVID-19 pandemic has highlighted the urgency of tackling mounting obesity levels. Severely obese people are three times more likely to be admitted to intensive care with COVID-19.
The investors filing the Tesco resolution argue that, as the leader in Britain’s grocery market, the supermarket plays a central role in shaping the nation’s diets.
“Supermarkets, and in particular their key worker staff, deserve credit for working tirelessly throughout the pandemic to keep food on the shelves,” said Ignacio Vazquez, a senior manager at ShareAction.
“However the companies also have a responsibility for the health impacts of their product ranges and marketing efforts.”
The resolution says Tesco’s health performance lags behind some of its peers and argues that new health regulations and consumer trends pose a risk to the business.
The resolution will be put to a vote at Tesco’s AGM. If passed, it will require the company to:
Disclose the share of total food and non-alcoholic drink sales made up of healthier products (as defined by the UK Department of Health) and develop a strategy to significantly increase that share by 2030;
Publish a review of its progress each year in its annual report from 2022 onwards.
Investors co-ordinated by ShareAction made similar requests at Tesco’s 2020 AGM, but ShareAction said the company has not made any significant progress to date.
The resolution represents a marked escalation in the investors’ engagement with Tesco on this issue. It is the first time a UK-listed company has been challenged with a shareholder resolution on health grounds.
“As the UK’s largest food retailer, Tesco’s actions are of systemic importance in tackling obesity,” Vazquez said. “But its prime market position has not yet translated into leadership on this critical issue.
“We hope that Tesco’s board will endorse the resolution and grasp the opportunity to help build a healthier UK post-Covid, while also improving its financial sustainability in the long-term.”
A spokesperson for Tesco said: “We are working hard to make it easy for our customers to make healthy choices, and we have set very clear targets on health and sustainability.”
The supermarket said it had removed 50bn calories from its products since 2018 and has announced a target to increase sales of plant-based meat by 300% by 2025.
“We keep our targets under review to ensure they are sufficiently stretching, reflecting feedback from a wide range of stakeholders, and will share our latest health ambitions ahead of publishing our next Little Helps Plan update,” the spokesperson said.
Tesco monitors the health profile of its sales via its ‘Healthy Little Differences’ tracker, but does not disclose this information publicly or set targets to increase the share of healthy products.
By contrast, since 2017 Marks & Spencer (MKS.L) has published annual progress updates towards its target of 50% of own-brand sales coming from healthier products by 2022. It reached 40% in 2019.
Sainsbury’s (SBRY.L) had a target to increase the percentage of healthier products it sold from 41% to 45% by 2020 and reached 43% last year. The supermarket has committed to setting 2040 targets and will report biannually from this year onwards.
A recent review by the Access to Nutrition Initiative found that Tesco reported on just 30% of indicators of good health practice. An October 2020 report from The Food Foundation said that “encouraging healthy diets” was Tesco’s weakest area of performance across 10 environmental and social topics.
The UK government estimates that at least half of all grocery sales come from products that are high in fat, sugar or salt. This is a key factor in rising levels of obesity in the UK, which accounts for almost 10% of national health expenditure.
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