AMP Capital has flagged reduced sugar consumption as a significant long-term investment trend that could hit the earnings potential of food and beverage companies.
Sugar and obesity topped a list of environmental, social and governance (ESG) risks in AMP Capital's full-year Corporate Governance Report, released yesterday.
Writing in the report, AMP Capital senior ESG analyst Kristen Le Mesurier noted that sugar is emerging as one of the "most prominent investment risks for the global food and beverage industry".
"Science has linked high sugar consumption to obesity and type 2 diabetes at a time when obesity rates are rising and healthcare costs for governments are growing," said Ms Le Mesurier.
Amid rising obesity around the world – 39 per cent of adults globally are now overweight, according to the report – a long-term trend towards health and wellness is "already limiting the growth profile of companies manufacturing and selling products with high sugar content", she said.
That trend would be likely to "deepen materially" if there were increased public concern from medical and public health organisations and "greater awareness from consumers about the sugar content of food", Ms Le Mesurier said.
Secondly, the imposition of sugar taxes, clearer nutrition labels and advertising restrictions in an attempt to reduce consumption would also pose serious headwinds for food and beverage companies, she said.
Finally, scientific evidence that sugar is the cause of particular diseases that cause death "may enable large-scale litigation", she said.
There are signs that the first two trends are occurring, given that the World Health Organisation reduced its recommended proportion of daily calories from sugar to six teaspoons a day in 2015 and publicly called on governments to tax sugary drinks in 2016.
"Soft drink sales for some listed companies are flat lining or trending lower, and processed food purchases per capita are down in some markets," Ms Le Mesurier said.
There are 'soda' taxes in Mexico, the UK, Philadelphia in the US (the first large US state to impose a tax on soda), the city of Berkeley in California, and there is a current proposal in Ireland, according to the report.
The Australian government has not yet ruled out a 'soda tax' (despite Deputy Prime Minister and Nationals leader Barnaby Joyce labelling the idea "bonkers").
The Greens have said they will introduce a private senator's bill by the end of 2017 if the federal government does not move to introduce one of its own.