Consumer goods giants like Unilever PLC (LSE:ULVR), Nestle and Procter & Gamble (NYSE:PG) could be facing an exodus of major investors due to concerns about new deforestation laws.
Under the new European Union law, companies will only be allowed to sell products in the bloc if the supplier of the product has a statement confirming they have carried out due diligence into whether the coffee, cocoa, beef, soya, palm oil or other commodities products used do not come from deforested land or have led to natural forests being cut down or converted to plantations from 2020 onwards.
A number of large institutional investors are worries about investments with exposure to this new law, Reuters reports today, with some investors suggesting they may withdraw from consumer goods investments with supply chains seen to be at risk.
Companies that do not comply with the law face maximum fines of 4% of their turnover in an EU member state.
Products covered by the new legislation are cattle, cocoa, coffee, soya, wood, rubber, charcoal, printed paper products, palm-oil and various palm oil derivatives, plus products that contain, have been fed with or have been made using these commodities, such as leather, chocolate and furniture.
Authorities will have access to relevant information provided by the companies, such as geolocation coordinates, and will conduct checks with the help of satellite monitoring tools and DNA analysis to check where products come from.