A coalition of institutional and retail investors have filed the first ever health-based shareholder resolution at a FTSE100 company, calling on the UK’s largest food retailer to set targets to increase the proportion of healthy products in its sales.
Tesco is in the spotlight in a resolution, co-ordinated by responsible investment NGO ShareAction. The proposal is being co-filed by seven institutional investors managing over £140bn ($193bn) in assets, along with 101 retail investors.
It reflects rapidly rising investor concerns with companies’ health impacts, seen until recently as a fringe issue even by many advocates of ESG investing.
But with severely obese people three times more likely to be admitted to intensive care with COVID-19, the pandemic has highlighted the urgency of tackling mounting obesity levels to build a healthier and more resilient society.
The investors filing the resolution argue that Tesco (TSCO.L), as the market leader with 27% of Britain’s grocery market, plays a central role in shaping the nation’s diets.
It argues it must reduce its reliance on unhealthy products for sales growth.
It also highlights that the grocery giant’s health performance lags behind some of its peers, while new health regulations and consumer trends pose a risk to the business.
The resolution will be put to a vote at Tesco’s AGM, which, if passed, it will require the company to:
Disclose the share of total food and non-alcoholic drink annual sales by volume 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 it says that the company has not made any significant commitments or progress to date.
The resolution represents a marked escalation in the investors’ engagement with Tesco on this issue and is the first time a UK listed company has been challenged with a shareholder resolution on health grounds.
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.
What’s more, a recent review by the Access to Nutrition Initiative found that Tesco reported on just 30% of indicators of good health practice.
Similarly, an October 2020 report from The Food Foundation found that ‘encouraging healthy diets’ was Tesco’s weakest area of performance across 10 environmental and social topics.
According to Tesco, the company monitors the health profile of its sales via its ‘Healthy Little Differences’ tracker, but it does not disclose this information publicly or set targets to increase the share of healthy products.
By contrast, Marks & Spencer’s “Plan A” includes annual progress updates since 2017 towards a target of 50% of sales (own-brand only) from healthier products by 2022. It reached 40% in 2019. Sainsbury’s has a target to increase the percentage of healthier products sold from 41% in 2015 to 45% in 2020 (it reached 43% in 2019/20). Sainsbury’s has also committed to set targets to 2040 and report biannually from 2021 onwards.
Tesco did not return Yahoo Finance requests for comment on the resolution by the time of publication.
Ignacio Vazquez, senior manager at ShareAction, said: “Supermarkets, and in particular their keyworker staff, deserve credit for working tirelessly throughout the pandemic to keep food on the shelves. However the companies also have a responsibility for the health impacts of their product ranges and marketing efforts.
“As the UK’s largest food retailer, Tesco’s actions are of systemic importance in tackling obesity. 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.”
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