By Eric Pedersen, head of responsible investments at Nordea Asset Management
From sprawling farmlands to bustling factories, the global food industry operates through a vast and intricate network of interconnected supply chains spanning the globe. This complex system, vital for bringing food to our tables, is driven by immense resource demands, logistical challenges, and environmental impacts, raising urgent questions about its long-term sustainability, efficiency, and resilience.
Beyond stocking supermarket shelves and feeding billions, the global food system is a major contributor to our current ecological challenges, accounting for roughly 30% of global greenhouse gas emissions and nearly 70% of the world’s freshwater withdrawals1.
More output and fewer resources
According to the World Bank, global agricultural production will need to increase by an additional 50% by 2050 to meet the needs of Earth’s growing population.2 The Oxford Future of Food programme highlights that food producers must accomplish this significant increase in output while simultaneously reducing their climate and environmental footprint significantly.3
Fortunately, governments, food producers, and other stakeholders are employing a wide range of innovative strategies to enhance the sustainability of the world’s food system.4 These efforts include stricter supply chain due diligence, the reduction of pesticide use, and significant investments in sustainable fertiliser production. However, this is a planet-sized task that demands active participation not only from policymakers and the food industry but also from consumers and other sectors of society.
The power of capital allocation
As investors, we have the power to influence companies. The targeted and strategic deployment of capital can play a role in equipping, empowering, and augmenting the sustainable producers of the future, while also reorienting traditional producers towards the sustainable practices that are crucial for ensuring the continued viability and resilience of our global food supply, while alleviating climate, water and other types of environmental stress.
Older and more traditional food suppliers face challenges similar to those of energy-industry incumbents – many of the models on which their businesses were built and expanded are increasingly unsuitable for the low-carbon economies we now recognise as essential.5 Focus areas in this regard notably include animal husbandry and the deforestation linked to changes in land use.
Both institutional and private investors can contribute to holding companies accountable in this landscape.
While the global food industry represents a resource-intensive and dauntingly complex system, it’s important to remember that investors can and do make a difference. In addition to allocating capital to firms employing exciting new technologies, investors can help established food producers to adjust existing policies and manufacturing techniques.
Nestlé: Engaging to promote positive change
Nestlé is a prime example of a major food supplier that continues to make positive environmental strides.6 With over 2,000 brands – including household names like Nespresso, Maggi, and KitKat – the world’s largest food and beverage company faces heightened deforestation risks linked to ongoing agricultural expansion, and the environmental and social impacts of its operations extend far beyond the company itself.
In response to these challenges, regenerative agriculture has emerged as a cornerstone of Nestlé’s net zero strategy. Nordea Asset Management began engaging with Nestlé in 2018, working collaboratively to help the company transform its agricultural practices in a way that supports long-term food security. Among our objectives were increasing transparency within the supply chain, protecting biodiversity, and improving soil health.
Encouragingly, Nestlé has set ambitious targets for sourcing raw materials from farmers employing regenerative practices. Furthermore, the company has made significant progress over the past six years in improving supply chain transparency for deforestation-linked ingredients such as palm oil, sugar, and soy – achieving an impressive 97.9% traceability rate in 2023.7
The company today has approved near and long-term science-based emissions reduction targets with the SBTi. The SBTi has validated Nestlé’s net-zero science-based target by 2050. These targets include its specific Forest, Land and Agriculture (FLAG) sector objectives for 2030 and 2050. The company is delivering its roadmap through emissions reductions and value chain removals. Importantly, It does not use offsets/voluntary market credits to deliver against its SBTi-validated targets, and has discontinued its former practice of claiming carbon neutrality for specific products, based on the purchase of carbon offsets.7
About Nordea Asset Management
Nordea Asset Management (NAM, AuM 264bn EUR*), is part of the Nordea Group, the largest financial services group in the Nordic region (AuM 400bn EUR*). NAM offers European and global investors exposure to a broad set of investment funds. We serve a wide range of clients and distributors which include banks, asset managers, independent financial advisors and insurance companies.
Nordea Asset Management has a presence in Bonn, Brussels, Copenhagen, Frankfurt, Helsinki, Lisbon, London, Luxembourg, Madrid, Milan, New York, Oslo, Paris, Santiago de Chile, Singapore, Stockholm, Vienna and Zurich. Nordea’s local presence goes hand in hand with the objective of being accessible and offering the best service to clients.
Nordea’s success is based on a sustainable and unique multi-boutique approach that combines the expertise of specialised internal boutiques with exclusive external competences allowing us to deliver alpha in a stable way for the benefit of our clients. NAM solutions cover all asset classes from fixed income and equity to multi asset solutions, and manage local and European as well as US, global and emerging market products.
Having entered the ESG space over 30 years ago, Responsible Investment is deeply rooted in our Nordic DNA. As an ESG pioneer and market leader we established an award-winning RI Team in 2009—now one of the largest in Europe. We currently offer a broad suite of RI solutions to investors of all types across the globe.
* Source: Nordea Investment Funds S.A.,30.06.2024
Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB and their branches and subsidiaries. This material is intended to provide the reader with information on Nordea Asset Management, general market activity or industry trends and is not intended to be relied upon as a forecast or research. This material, or any views or opinions expressed herein, does not amount to an investment advice nor does it constitute a recommendation to buy, sell or invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. Unless otherwise stated, all views expressed are those Nordea Asset Management. Views and opinions reflect the current economic market conditions, and are subject to change. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information. Published by the relevant Nordea Asset Management entity. Nordea Investment Management AB and Nordea Investment Funds S.A. are licensed and supervised by the Financial Supervisory Authority in Sweden and Luxembourg respectively. This material may not be reproduced or circulated without prior permission. © Nordea Asset Management.
