*This article was produced in partnership with T. Rowe Price
Over the past 50 years, a dramatic shift in diets has had wide ranging consequences for the environment and human health. Growing affluence and urbanisation has driven higher calorie consumption with global diets now including more ultra-processed food and animal products.
These factors have led to a growing focus on meeting contemporary consumer preferences while considering diet-related health and environmental externalities that stem from food consumption, also known as the “food trilemma”. The conversation comes as part of a growing body of work recognising the significant role in food in social, health and environmental outcomes.
Looking at this shift through the lens of the food trilemma, we see that changes in global diets have been negatively impacting human health (due to food quality and quantity) and the environment (due to increased agricultural activity). Consumers only pay for around half of the total societal cost of food—the rest is borne by broader society as governments are forced to remediate the environmental and health costs associated with today’s diets.
Obesity is an increasingly common byproduct of the food system in almost all countries. In contrast to the outdated view of Western economies with “too much” food and emerging market economies with “not enough” food, obesity is now dominant in almost all countries.
According to the World Health Organization (WHO), one in eight people worldwide is obese. With the societal burden of obesity increasing so dramatically in the last four decades—the number of disability-adjusted life years lost due to excess body mass index (BMI) has more than doubled, which represents a greater increase than any other leading health risk. Obesity and other metabolic risk factors are now the dominant drivers of disease globally.
We expect that the emergence of anti-obesity medications (AOMs) such as GLP-1s will play an unquestionable long-term role in balancing the food trilemma by directly addressing obesity as a key health pressure point and a dominant outcome of food systems.
However, we also believe that their uptake, alongside other factors such as scrutiny of ultra-processed food, could have much broader implications for public attitudes towards food and obesity.
GLP-1s are amplifying the narrative that obesity is not a failure of individual willpower, but a byproduct of the food system and a disease. The advent of GLP-1s, alongside scrutiny of ultra-processed food, could therefore increase public awareness of the science of food reward and health costs of contemporary diets. This raises the question of what (if any) measures will different societies take to address the underlying food system drivers of obesity.
Data published in academic journal Diabetes, Obesity and Metabolism in 2017 suggests that GLP-1 treatment reduces food cravings and alters the types of food consumed. Rather than simply reducing the quantity of food consumed, patients substitute unhealthy food like sugary drinks, chocolate and salty snacks for fresh produce, poultry and fish.
While some patients are able to sustain weight loss by continuing healthier eating habits and other lifestyle changes, with currently available therapies, many patients regain weight after ceasing treatment. This reflects an underlying issue with food environments that promote weight gain. There are clearly several components to this, but a shift in diets towards ultra-processed food (UPF)—especially in the U.S. and UK—is a key driver.
As such, it is increasingly likely that food companies could face potentially more stringent regulatory regimes in individual markets due to closer scrutiny of their role in public health. On a much longer-term time horizon, the scale of obesity as a global health issue also raises the (albeit now seemingly slim) prospect of international multilateral efforts to combat its spread. While both the United Nation’s Millennium Development Goals (MDGs) and Sustainable Development Goals (SDGs) have focused on hunger, perhaps the next round of goals could more specifically focus on reducing obesity?
ESG investors may therefore wish to adopt a more nuanced, stock-specific approach when evaluating food and beverage companies vs. the exclusions-oriented playbook applied to global tobacco.
This approach may involve scrutinising the nutrition characteristics of food portfolios, product labelling, advertising and lobbying and influence in public health.
Maria Elena Drew is director of research, responsible investing for T. Rowe Price. Daniel Ryan is analyst, responsible investing for T. Rowe Price.
