Growing demands from investors and the wider stakeholder community has placed the food sector at the heart of the sustainability debate - and agri-food leaders are more than stepping up to the challenge. To get to the heart of current agri-food sustainability initiatives and ESG perspectives, Goodbody recently hosted its inaugural Environmental, Social and Governance (ESG) conference ‘Food investing and the Green economy’.
The event brought together thought leaders and senior executives from key European food companies, many with a global reach and providing a holistic farm-to-fork view of the industry. We discussed both the opportunities and challenges the fast-evolving Green Economy poses for agri-food companies and the opportunities for investors to deploy capital behind farming innovation and food sector sustainability initiatives.
The climate imperative
Sustainability has been rising up companies’ risk registers for years, with the Paris Agreement signed by governments in 2015 putting climate change at the centre of the global discussion. COP26 and the Race to Net Zero campaign have shone an even brighter light on climate change issues globally. In recent months, we have seen more scrutiny than ever before on ESG issues, with Covid-19 highlighting the urgency around already pressing social issues.
For investors, there has been a sea change over the past 12-18 months with investing in sustainability transitioning from a ‘nice to have’ to being viewed as a crucial driver of value creation. This has been reflected in asset management where there has been significant progress on integrating ESG strategies into the asset management process, with an acceleration in engagement levels between companies and their stakeholders.
According to a recent EPFR report, during 2020, Socially Responsible Investment (SRI) and ESG investment recorded inflows of $168.7 billion compared to $63.3 billion in 2019, and the global fixed income market is now worth over $1 trillion from a near standing start in 2016.
How has the food sector responded?
The food sector plays a large role in the sustainability discussion due to its far-reaching impacts on the environment as companies seek to feed an ever-growing population. From production to consumption and waste, the sector has repercussions across a range of areas including climate change, food waste, water scarcity, food security and nutrition, and biodiversity loss. Our speakers highlighted the growing importance of balancing the commercial opportunity whilst looking to combat their environmental footprint.
The food companies we spoke to shared the ways in which they are tackling sustainability issues head on, making it clear that this is now another important lens through which boards and management teams evaluate risks and opportunities.
- Embedding sustainability at the heart of corporate purpose, culture and decision making: Sustainability has become an explicit part of corporate strategies and in many cases is articulated through purpose statements, demonstrating a commitment to embed ESG issues across the business. For example, Glanbia has launched its “Pure Food and Pure Planet” strategy and Greencore has put in place its “Making Everyday Taste Better” programme.
- Measuring progress with rigorous checks and balances: Far from lofty aspirations, these strategies are backed up by clear targets, in some cases consistent with the Paris Agreement pathway and aiming for net zero. For many companies, these are being led by ESG specialists and appointed Sustainability Managers, and overseen by central steering committees, providing ultimate accountability, and helping to drive the strategy forward.
- Supporting innovation: Innovation is pivotal to progress and is evident throughout the supply chain. At a farm level, businesses are implementing new farming methodologies, water irrigation, and biodiversity measures. At the manufacturing level, we are seeing innovation focused on driving more sustainable nutrition as well as supporting more recyclable packaging.
Growth in the green economy
Spurred on by international regulation, consumer preferences and investor demand, there is no doubt that leading food companies are putting sustainability at the heart of their corporate strategies.
We believe that companies that have strong ESG sustainability goals embedded in their strategies will benefit from greater access to debt and equity capital at competitive costs, in turn financing the organic and M&A investment needs to materially advance their presence in the green economy.
Please contact Joe Gill, Director of Origination and Corporate Broking
E [email protected]
