Global Food & Beverages: Integrating ESG

It can pay to lead on ESG
We have introduced ESG frameworks for four
sectors to date. In each case, we have found that
ESG framework leaders have outperformed their
peers: Energy ESG +4% since Oct 2006; Media
ESG +6% since Feb 2006; Mining ESG +2% since
Jul 2006; and Steel ESG +11% since Jul 2006.
Cash returns have driven performance
Valuation and cash return spreads over the past
15 years for the global food & beverages sector
have been highly correlated (R2=.66). We find that
portfolios constructed based on cash return
spreads have consistently outperformed those
based on traditional metrics, including P/E,
dividend yield and EV/EBITDA.
New products, new markets key to returns
Food & beverage companies are maintaining and
re-energizing brand portfolios through product
innovation; global players are increasingly
focused on introducing their brands to new
middle-income consumers in emerging markets;
and M&A continues to help drive valuation.