Case Study

Kepler Cheuvreux: A cookbook for a healthier portfolio

Kepler Cheuvreux is a leading independent provider of advisory services and intermediation to the investment management industry. It is widely recognised as a leader provider of sustainability research and in 2008 became the first brokerage house in Europe to sign the UN-supported Principles for Responsible Investment.

Cutting down on unhealthy business models

Kepler Cheuvreux recognise that global food habits have led to a spike in obesity and are putting increasing pressure on the environment, leading to heightened customer and government scrutiny of unsustainable food systems. Thus, to help investors build investment baskets that benefit from a transition towards a healthier and more environmentally-friendly food sector, the firm produced a ‘Cookbook on food and nutrition security’ and introduced its proprietary Sustainable Food and Lifestyle Framework.

The framework helps investors assess which companies are well positioned to benefit from the transition to a more sustainable food system, and which advance the UN Sustainable Development Goals (SDGs) – especially SDG 2 (End hunger) and SDG 3 (Healthy lives and wellbeing).

The Kepler Cheuvreux framework scores companies based on both their exposure to healthy food (which refers to products that have a positive nutritional impact), and their exposure
to green food (which looks at the environmental impact of products).

The firm found that companies scoring the highest were those focused on fruits, vegetables and organic food. They argue that food companies with a portfolio of products skewed towards
nutrition – such as Acomo, Wessanen, Danone,Total Produce and Bonduelle are better placed to benefit from secular growth themes associated  with healthy lifestyles than those with significant exposure to products that represent unhealthy food trends. Likewise, companies in buoyant health and wellness markets, such as “plant-based”,“free from”, “fortified”, or “organic” are experiencing especially strong momentum. Food and nutrition security is clearly an attractive longterm play for investors.

Kepler Cheuvreux’s view is that “In tandem with the energy sector, the food industry is undergoing a profound transition in which environmental and social drivers are taking
centre stage. Concerns associated with the environmental, health and ethical features of the livestock sector constitute both an opportunity and a challenge for the industry.”

In particular reference to the livestock industry,the firm points to the link between diseases and diet. For example, an increase in meat consumption of 100 grams per day leads on
average to a 10% higher risk of suffering a stroke.

The firm also recommends that FAIRR members and other investors use tools such as the Access to Nutrition Index to assesses companies’ nutrition profiles.

“There is increasing evidence that low-calorie/low-carbon products help improve competitiveness” – Kepler Cheuvreux

Kepler Cheuvreux concludes, “We believe that there is increasing evidence that low-calorie/low-carbon products help improve competitiveness, as food seen as healthy and more environmentally friendly continues to win market share against more processed and unhealthy products.”

Overhauling agricultural markets critical for nutrition goals

Using its Sustainable Food and Lifestyles Framework Kepler Cheuvreux argue that meeting the SDGs will require a complete overhaul of agricultural markets and argue that there are
attractive long-term plays and transformation stories for investors who take sustainable food and lifestyle considerations into account.

Image: Relative health impacts of food items based on nutrition and environmental pressure criteria

More information:
https://www.keplercheuvreux.com/