“Smart food”: because all that is sugary is not so sweet for the environment

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The Business and Climate Summit (an annual forum for businesses, investors and policymakers on climate action), seeks to set out a roadmap for how business, in the short, medium and long term, can take advantage of a swift transition to the net zero carbon economy. At the last summit (prior to the COP21 in Paris), an agreement was reached on the fact that corporate activities must adhere to sustainable development principles and adopt sustainable production processes. Among the companies considered controversial we find the producers of sugary sodas and soft drinks, firstly, because of their business activity and, secondly, on account of their production practices.

In Mexico, consumption of sugary drinks has become a major public health issue. The figures speak for themselves: Mexico is the world’s largest consumer of such products, ahead of the United States. 70% of adult Mexicans are overweight, 32% are obese, and 10% are diabetic. Sugary beverages are a core element of daily life and Mexicans consume them without thinking about what they are doing. This phenomenon is not restricted to Mexico. In many Latin American countries, sugary beverages are now an integral part of the local culture, so much so that they have replaced water in the traditional rites of some tribes. More broadly, illnesses due to excess sugar consumption are increasing worldwide. Here, again, the statistics provide a clear picture: the number of people suffering from diabetes has risen from 108 million in 1980 to 422 million in 2014, and the World Health Organization forecasts that by 2030 that diabetes will be the world’s seventh most common cause of death.

It is not just a question of the public health issues associated with consumption of soft drinks. The entire sugary beverages production chain frequently involves practices that violate the basic rights of local populations or damage the local environment. The complete production chain of these drinks that has been brought into question.

Let’s start with production. Some companies, especially in Latin America, monopolise land and water resources to the detriment of native populations, who are deprived of their main means of subsistence. The manufacturing of soft drinks requires large quantities of water – two litres of water for one litre of sugary beverage. These companies abusively pump out groundwater in arid regions, where water is already scarce and access difficult. Their activities are often protected by lax environmental laws. Sometimes, local populations rebel and, when possible, assert their rights. For example, in drought-prone India, a soda factory had to close under accusations from local activists that the factory violated environmental regulations.

Further downstream in the production cycle, the bottling process is highly polluting, and in emerging economies is very often subject to no regulation whatsoever; the chemicals used in the bottling process are dumped without regard for the consequences. Just to show how perverse these practices have become: in some regions, not only is water drying up, but what’s left is being made unfit for consumption by pollutants.

Lastly, at the end of the distribution chain, a corollary of the consumption of sugary beverages is the careless throwing away of plastic and other bottles, few of which are recycled or even recyclable.

To support sustainable development, BNP Paribas has created an innovative strategy called “SMaRT Food”, which aims to finance those companies in the food value chain that help to protect the environment. In doing so, BNPP IP applies the strictest precautionary principles in choosing only the most virtuous companies.

Sustainable and responsible investments (SRI) is one of the nine themes which we think reflect investors’ key priorities this year. Linked to those themes we have chosen funds which we believe represent the most relevant solutions to the challenges of the current market environment as well as the evolving needs of our clients.

BNP Paribas Asset Management’ offering includes a broad range of SRI products to meet the needs of clients who are keen to combine return potential with making a positive impact on the environment and society.P1601015_Pictos_100x100_life_long

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Alexandre Jeanblanc

Investment Specialist, SRI

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