Sustainable Impact Investments

Portfolio Manager Ted Franks and Senior Analyst Claire Jervis provide a portfolio update and insights from the reporting season.

The above webinar recording includes a question on animal welfare, specifically in the context of an article written on HelloFresh’s use of coconuts in it’s meal kits. Due to the recency of the article published in proximity to the date of the webinar, the team promised to provide an extensive response to the accusations by PETA on HelloFresh following the webinar.

Below is the team’s initial response.

We have learned that there is a long history of using monkeys to harvest coconuts in South and South East Asia. This practice obviously raises welfare concerns which were highlighted by the recent investigation by PETA, which specifically looked at the coconut milk industry in Thailand.

Our investee company, HelloFresh, is a buyer of coconut milk for their meal kits. It does not produce coconut milk, or harvest coconuts itself, and therefore is not a direct user of monkey (or indeed any other animal) labour. As a purchaser of coconut milk the company has a responsibility to ensure that its suppliers operate in a way that does not negatively affect the welfare of animals. When onboarding and auditing its suppliers, HelloFresh requires strict confirmation that monkey labour is not in their coconut milk supply chain. Notwithstanding this, HelloFresh has currently switched its coconut milk sourcing from Thailand to Sri Lanka, while seeking more visibility on the issue raised in the PETA investigation.

We have already sought further clarification of HelloFresh’s approach in a number of areas (e.g. the scale of their activity in purchasing coconut products and the extent of their auditing processes) and the company has offered WHEB a detailed call on this issue, which will happen shortly (precise timing still to be confirmed).

WHEB’s approach to supply chain management and controversy screening

We would also like to take this as an opportunity to comment more generally about the initial due diligence and ongoing monitoring that we undertake in relation to sustainable sourcing. Our initial research considers how companies manage material environmental and social issues in their operations. For HelloFresh this included an assessment both of their own operations (focusing on environmental issues such as GHG emissions, energy management and food waste and particularly employee-related issues) as well as supply-chain management. We considered the ‘quality and sustainability’ assessment that the company undertakes on every supplier as well as the standards that they apply to their supplier relationships. For example the company applies Global GAP (Good Agricultural Practice) standards and also subscribes to the Global Food Safety Initiative as well as specific standards in key areas (eg such as the Marine Stewardship Council standard for fish products). They also have zero tolerance standards for child and forced labour.

We consider this to be a reasonably robust approach and have since engaged with the company on multiple issues where we have wanted to see stronger performance (eg on plastic packaging and clearer sustainability standards on palm oil and soya ingredients). The company has been responsive to our engagement and recognises the need to continue to improve performance in these areas.

We actively monitor companies in the portfolio on an ongoing basis to identify any social, environmental or governance issues that we may need to react to and engage the company on. We use a number of third party data suppliers and media monitoring services to alert us to new issues. However, it is our experience over many years that it is simply not possible to foresee every potential issue that a company might encounter. This is particularly true of a company like HelloFresh which has a very complex and extensive supply-chain.

However, what we can do is be very responsive when an issue like this crops up and engage the company to understand the nature of their exposure and the policies and processes that they have in place to identify and manage these issues. As stated, HelloFresh has been responsive to our engagement in the past and we expect that this will continue to be the case. We are reassured that they have already stated that there is no monkey labour in their supply-chain, but we will continue to explore this issue with them in the coming days and will report back when we learn more.

CPD points applicable for Australian Financial Planners

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