Wednesday, July 05, 2017

From Beef to Palm Oil, Investors Worry about Climate Risk in the Food Industry

Investors pressured Exxon to disclose its climate risk.  Now they're targeting food companies with similar shareholder resolutions — 131 this year.

Indonesia has fed the world's appetite for palm oil by chopping down its tropical forests to clear space for palm plantations, while Brazil has lost rainforest for cattle ranches. Investors are now pressuring food companies to find more sustainable sources for ingredients. (Credit: Dimas Ardian/Getty Images) Click to Enlarge.
New York State Comptroller Thomas DiNapoli oversees the country's third-largest pension fund, with $192 billion in assets, and is concerned both about ExxonMobil's tar sands oil and about the sources of palm oil and other ingredients that go into Domino's pizzas.

He's at the forefront of a trend.  Over the past several months, historic shareholder resolutions have pushed oil giants, including Exxon, to disclose their climate-related risks.  Food companies are next, experts and investors now say—whether they use or produce palm oil, corn, soy or beef, to name some with the biggest climate impacts.

"There are many products consumers enjoy daily that suppliers produce in ways that destroy rainforests and promote climate change," DiNapoli said.  "More and more companies recognize that by taking steps to buy palm oil or soy from suppliers that do not contribute to deforestation, they are promoting better environmental practices and protecting their shareholder value."

DiNapoli led a push by investors in May to force Exxon to better explain the impacts of climate change on its business.  He led a similar though unsuccessful effort calling on Domino's Pizza to commit to a deforestation-free supply chain.  

Shareholder resolutions like these are rising in both number and variety, according to research from the sustainability advocacy group Ceres, which has tracked shareholder resolutions within the top publicly traded U.S. food companies in recent years.

The number of climate-related resolutions filed with food and beverage companies is up from 12 in 2011 to 131 this year.  Of those, most were focused on deforestation linked to supply chains—from the production of palm oil, beef and soy—as well as climate change and animal welfare.  Resolutions were filed with 44 companies over that period. 

Ceres believes that consumers are increasingly interested in transparency in the food system and prompting investors to push companies toward more sustainable production methods.

The group released a guide last week for food company investors that illustrates the climate-related risks that each of eight commodities represents to supply chains and businesses.  (The companies include packaged food companies, agricultural producers, retailers and restaurants, among others.)  The guide also looks at issues beyond but related to climate change, including water use and pollution, as well as social impacts, including land rights and working conditions.

Read more at From Beef to Palm Oil, Investors Worry about Climate Risk in the Food Industry

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