SOCIALLY AWARE INVESTORS
MULL JUNK FOOD DEBATE
Tome "socially responsible" investors who avoid putting their money in companies that make weapons, cigarettes or beer are pondering whether to take a tougher stance on makers of fat-laden, high-sugar foods.
Socially aware mutual funds, which avoid some business sectors as well as corporations they think have poor environmental or labor practices, typically have no formal policies on nutrition.
But the issue has become hot as companies such as fast-food chain McDonald's Corp. MCD.N come under fire from critics who say junk food contributes to growing health problems such as obesity and diabetes, particularly among children.
Now, some socially conscious mutual funds, which together oversee about $19.1 billion, say they are taking a closer look. They say they could decide not to invest in some of these stocks or, more likely, try to use their platforms as large shareholders to press for changes within the companies on nutrition issues.
"It's definitely a problematic industry and it's something we have been looking at pretty closely over the last few months and trying to see if there is a different way to approach it," said Adam Kanzer, director of shareholder advocacy for Domini Social Investments. Domini's $1 billion Domini Social Equity fund DSEFX.O currently invests in stocks including McDonald's and rival Wendy's International Inc. WEN.N , as well as soft drink makers Coca-Cola Co. KO.N and PepsiCo Inc. PEP.N .
But, Kanzer said, investors must differentiate between fast-food chains that make unhealthy meals frequently consumed by the U.S. public and companies that produce pleasurable treats enjoyed in moderation, like ice cream.
He said he sees little consensus on how to address the issue of fast food. "Most social investors are absolutely opposed to tobacco, gambling, or nuclear power stocks," he said. "They are not so clear on fast food."
The Calvert Group, which manages about $2.5 billion in socially screened investments, said its social research staff also is interested in exploring nutrition issues more deeply.
"Right now, it does not influence decisively whether we pass or fail" a company, said spokeswoman Elizabeth Laurienzo. "It's something down the pike they want to explore further."
Food makers have been under pressure to develop healthier products. The U.S. government this week issued new regulations requiring all packaged foods sold across the country to carry labels saying how much artery-clogging trans-fats they contain.
WORKING THE PROBLEM
Earlier this month, Kraft Foods Inc. KFT.N , the biggest U.S. maker of processed foods, said it planned to reformulate some of its products to improve nutritional content and would stop marketing in schools.
McDonald's, the target of a recently dismissed lawsuit which linked its supersized meals to obesity in children, also has announced new initiatives to promote healthy lifestyles.
Already, some socially conscious funds avoid some of these stocks for other reasons. They generally do not hold Kraft, for example, because it is majority-owned by tobacco company Altria Group Inc. MO.N Some social investors also reject McDonald's over labor issues and other concerns.
At one fast-food company, Wendy's, the issue of nutrition has not been a focus of institutional investors, said Bob Bertini, a company spokesman.
"We certainly respect the input of shareholders and take their comments seriously, but we have not heard from institutional shareholders or funds," he said.
Some money managers who oversee socially conscious portfolios for individual clients say junk food is an issue for some of them. But fund manager Joyce Haboucha, of Rockefeller & Co., said she does not think this will become a major focus of most social investors, in part because she thinks food companies will address the concerns themselves.
"I think the companies are going to get in front of it and figure out how to deal with some of it," she said. But "I don't think it's going to be an easy issue."
Written by: Martha Graybow, Planet Ark
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