ESG is already helping to shape large FMCG companies’ strategies. Danone’s acquisition of WhiteWave, RB’s acquisition of Mead Johnson and Unilever’s acquisition of Seventh Generation are all examples of ESG-driven portfolio decisions. In addition to M&A, ESG influences marketing messages, product formulations, packaging, capex and many other areas. For example, Unilever created the Love Beauty & Planet and Love Home & Planet brands to address the lack of a large-scale, multi-category sustainable living brand in HPC, and the company has also committed $1bn of investment to remove fossil fuels from its cleaning products. Amazon’s decision to apply “Climate Pledge Friendly” labels to more than 25,000 products on its website, including the major FMCG categories, reflects strong consumer demand for greater transparency about products. The pressure on brands to improve their sustainability credentials is mounting. In company annual reports, the ESG report is frequently placed ahead of the financial report for the year, highlighting its importance to the Board and to shareholders. We look at some of the ESG statistics currently being measured by the companies under our Consumer Goods coverage, to compare how they are each approaching this important evolution. The efforts being made by the companies are admirable, but some companies are further along on this journey than others. Within our coverage, we think Unilever, Diageo, RB and Pernod Ricard have made more effort on ESG initiatives than others. We make no changes to our recommendations or target prices. Strangely, remuneration policies do not yet reflect the importance of ESG. Within our coverage only Diageo, Pernod Ricard, Unilever and Tate & Lyle have a component of management remuneration linked to ESG metrics; despite being a leader in many areas of ESG, Unilever is only incorporating ESG into management remuneration from 2020. We expect this to be more widely adopted across the sector over time, with ESG linked remuneration becoming a must-have. Tobacco faces many specific challenges in an ESG-driven world. Many investors have chosen to exclude the sector altogether, whereas others are prioritising investment in companies that are pushing faster into reduced risk products. Overall, however, the pool of available capital for Tobacco stocks has shrunk. The new Tobacco Transformation Index, published on 21st September, ranks Tobacco stocks by how advanced they are in transforming their strategies to advance harm reduction. This may provide helpful context for investors who want to continue investing in Tobacco for income or other reasons, but who also wish to incorporate ESG into their decision-making process. It is early days, but we expect that the Tobacco companies will evolve their ESG strategies significantly over the medium-term, prompted by investors and governments.