ESG Club
PI Partnership – Legal & General Investment Management
Madeleine King is co-head of investment grade at LGIM
Jonathan Lawrence is a responsible invest- ment analyst at LGIM
More than 650 million people were obese in 2016, according to the World Health Organisation.¹ In 2017-2018, more than 40% of the US population was obese.² The rate of obesity prevalence is increas- ing, as people are less physically active and eat more energy-dense food with low nutritional value. Obesity is linked to multiple leading causes of death, including diabetes, heart disease and strokes. As a result, it has sig- nificant economic implications: the OECD estimates that 8% of member countries’ health budgets will be spent treating the consequences of obesity and related con- ditions during the next 30 years.³ Indeed, the disease holds back economic growth as it prevents workforces from op- erating at full productivity. In doing so, it obstructs progress towards a number of the UN’s Sustainable Development Goals, which we target as a firm; for example, “decent work and economic growth” and “good health and wellbeing”.
Jennifer Wong is an equity investment analyst at LGIM
TACKLING OBESITY AS AN ESG ISSUE
The global disease presents risks and opportunities to investors – and the chance to deliver positive change.
Obesity is widely recognised as the most prevalent disease in the world, with mean- ingful health, social and economic impli- cations. Yet we believe many investors do not acknowledge its financial materiality as an ESG issue, nor the role they can play in tackling the condition.
Active engagement At LGIM, we believe that given the signifi- cance of the issue, it is important that as a forward-looking, responsible investor, we must consider obesity as a factor in our investment process and in our engage- ments with the companies in which we invest on behalf of our clients. We have already started to engage on the topic with companies across different industries. Our investment stewardship team worked with ShareAction, the NGO, on Tesco.4 Our engagement helped to prompt the retailer – Britain’s largest – to set a more ambitious nutrition target, with the company now pledging to derive 65% of total sales from healthy products by 2025 (up from 58% at present). We also work with the Access To Nutrition Initiative to engage with the 25 largest
food and beverages companies in the world on their nutrition strategy. Within our active strategies team, we now factor the issue into our assessment of packaged food and beverage companies, to inform our investment views and engagement agenda. We believe compa- nies with high revenue exposure to unhealthy products are likely to face the dual headwinds of increasing regulation and limitations on marketing of unhealthy foods.
In addition, we see appealing investment opportunities
in the healthcare space,
where the anti-obesity medication market is experiencing a breakthrough in terms of safety and efficacy. Today, only about 2% of obese patients are treated with anti- obesity medication (AOM).5 With safer and more efficacious anti-obesity drugs coming into the market, we expect this percentage to increase meaningfully, driv- ing growth for the AOM market during the next decade. This issue is but one of many on which our global research and engagement groups focus, leveraging expertise across fixed income, equities and investment stewardship to deliver cross-asset insights into investment opportunities and risks – and areas to deliver positive change for our clients.
1)
https://www.who.int/news-room/fact-sheets/detail/obesity- and-overweight 2)
https://www.cdc.gov/obesity/data/adult.html 3)
https://www.oecd-ilibrary.org/sites/6cc2aacc-en/ index.html?itemId=/content/component/6cc2aacc- en#:~:text=Countries%20will%20spend%20 around%20 8,treating%20overweight%20and%20related%20 conditions.&text=Combined%2C%20the%20impact%20of%20 overweight,on%20average%20 in%20OECD%20countries
4) For illustrative purposes only. Reference to a particular security is on a historical basis and does not mean that the se- curity is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security 5)
https://www.ncbi.nlm.nih.gov/pmc/articles/ PMC7003734/#oby22696-bib-0028
Important Information Past performance is no guarantee of future results. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. Views expressed are of LGIM as at December 2021. The Information in this document (a) is for information purposes only and we are not soliciting any action based on it, and (b) is not a recommendation to buy or sell securities or pursue a particular investment strategy; and (c) is not investment, legal, regulatory or tax advice. Assumptions, opinions and estimates are provided for illus- trative purposes only. There is no guarantee that any forecasts made will come to pass. Assumptions, opinions and estimates are provided for illustrative pur- poses only. There is no guarantee that any forecasts made will come to pass. Legal & General Investment Management Limited. Registered in England and Wales No. 02091894. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119272
38 | portfolio institutional | March 2022 | issue 111
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