Sugar now an investment risk: AMP

Sugar is becoming one of the biggest risks for investors in the global food and beverage industry, fund manager AMP Capital says.

The UK, Mexico and Philadelphia in the US have imposed taxes on sugary soft drink. Photo: Getty Images
The UK, Mexico and Philadelphia in the US have imposed taxes on sugary soft drink. Photo: Getty Images
Amid rising obesity levels and growing healthcare costs, a new report from AMP Capital says concerns about the sweet stuff have begun limiting growth for companies manufacturing and selling high-sugar products.

"Sugar is emerging as one of the most prominent investment risks for the global food and beverage industry," AMP Capital's latest Corporate Governance Report, which looks at ESG [Environmental Social Governance] investment trends, said.

It pointed to moves including taxes on soft drink - so-called "soda taxes" - in Mexico, the United Kingdom and Philadelphia and changes to United States nutrition labelling laws as signs that sugar may no longer be such a sweet investment.

"Soft drink sales for some listed companies are flatlining or trending lower, and processed food purchases per capita are down in some markets," AMP said.

"There is evidence of increasing numbers of consumers making healthier food choices."
In Australia, AMP pointed to the Greens' policy to introduce a soda tax by the end of the year.

"While the major parties in Australia do not yet have plans to introduce any form of soda tax, the public discussion generated by the possibility of a soda tax has the potential to reduce consumption given that it shines a spotlight on the issue and accelerates consumer education about the health impacts of sugar," the report said.

"We believe these discussions will step up a notch during 2017."

Other ethical and socially responsible investment trends to watch include renewable energy, the report said, despite fears that the US will withdraw from the Paris climate change accord to phase out greenhouse gas emissions by the second half of the country.

"While disappointing, President Trump's position is not seen as a barrier to curb emissions. It's a matter of economics," the report said.

"The old coal generation model no longer makes financial sense and the private sector is proactively preparing for a renewables-centric and climate change-resilient world."

Energy security and the future of coal-fired power are high on the agenda in Australia at present, with Victoria's ageing Hazelwood brown coal power plant shutting down on Friday.

Hazelwood provided up to 25% of the state's energy.

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