With environmental and social impacts increasingly influencing investor decision making, Ceres has developed a new peer-reviewed resource guide to help investors better analyze financial risks in the food sector.
Engage the Chain provides an overview of the environmental and social challenges associated with the production of eight major commodities: beef, corn, dairy, fiber-based packaging, palm oil, soybeans, sugarcane and wheat. The tool offers specific examples of reputational, market, operational, litigation and regulatory risks that food companies may face as a result of these impacts in their supply chains.
“Commodity based agriculture production is emerging as a key driver of climate change, deforestation, water pollution and biodiversity loss, while also subjecting hundreds of millions of people employed in agriculture around the world to harsh working conditions and poverty,” said Allan Pearce, shareholder advocate at Trillium Asset Management.
“Many companies don’t understand the full extent of these impacts in their agricultural supply chains, which is alarming because these can pose real financial risk.”
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Commodity sourcing is becoming increasingly challenging with the onset of climate change, putting both businesses and investors at risk. Engage the Chain seeks to help investors mitigate mounting reputational, operational and other material risks embedded in agricultural supply chains. The tool highlights key drivers of financial risk and provides detailed briefs on each of the eight commodities, complete with global production data, a visual of the value chain for each commodity and an assessment of how drivers of financial risk are impacting the commodity.
Investors also have access to an interactive table demonstrating the exposure of major U.S. food and beverage companies to each of the commodities and guidance on the steps that can be taken to evaluate material risks that threaten their portfolios.
“If a company cannot trace its supply chain, it cannot begin to address the substantial risks, including potential involvement in illegal practices that lie hidden several tiers down,” said Adam Kanzer, Managing Director at Domini Impact Investments. “We hope that Engage the Chain will provide one more link in the chain of accountability.”
Engage the Chain was developed with peer review support from investors, companies and NGOs. It was funded in part by the Gordon and Betty Moore Foundation, as part of a conservation and financial markets collaboration among the Foundation, Ceres, World Business Council for Sustainable Development and World Wildlife Fund.