Institutional investors including the Norwegian sovereign wealth fund and Rothschild & Co are asking PepsiCo to report on its dependencies on biodiversity in a bid to quantify the financial risks related to nature loss.
On Tuesday, the Norges Bank Investment Management (NBIM), which oversees Norway’s $1.6 trillion sovereign wealth fund, announced it would support a shareholder proposal on the topic during the upcoming annual general meeting of the shareholders of PepsiCo, scheduled for May 1, according to Reuters.
Allianz Global Investors, the LocalTapiola Asset Management, and Rothschild & Co Asset Management have previously declared support for the filing for the company to disclose on the vulnerability to biodiversity decline of its supply chain and operations, according to the Principles of Responsible Investment.
The support is no indication of the proposal succeeding. NBIM is one of the largest institutional shareholders with $2.8 mln in shares as of the end of last year, but these made up under 2% of the company’s value, according to Nasdaq.
The resolution, filed by US-based Green Century Capital Management, stressed that “failure to comprehensively assess its natural capital dependencies and ultimately mitigate their impacts on the company may expose PepsiCo to unnecessary risk”.
In light of the vote, PepsiCo’s board rejected the need for a biodiversity assessment, claiming it would not be in the best interests of the company or its shareholders, and pointing out that the firm already reports on sustainability initiatives.
However, the resolution said: “While PepsiCo has developed a number of commendable sustainability initiatives, it has not undertaken a systematic review of its dependencies and impacts on biodiversity and natural capital.”
“Without a comprehensive assessment of the company’s biodiversity impacts, dependencies, risks, and opportunities to inform its policies, PepsiCo may subject itself to unnecessary systemic, regulatory, and financial risk.”
On May 16, shareholders of the US-headquartered retail giant Home Depot will vote on a similar resolution during the annual meeting.
Matt Christensen, global head of sustainable and impact investing at Allianz Global Investors, said last week: “With these votes, we wish to indicate that we expect to see further progress with the companies’ biodiversity impact and dependency assessments.”
“It is an important next step for their strategy advancement and will hopefully include more ambitious targets to meaningfully address biodiversity loss and drive positive change.”
Mentioned as a key target under the Kunming-Montreal Global Biodiversity Framework (GBF), corporate nature-related financial risk assessments are climbing the investors’ agenda.
According to a 2023 study by Oxford University, biodiversity loss and ecosystem damage could cost upwards of $5 trillion to the global economy.
Companies are increasingly adopting frameworks such as the Taskforce on Nature-related Financial Disclosure (TNFD) to assess their dependencies, impacts, and risks.
In February, NBIM identified “very high” nature risks in its first TNFD disclosure step.
By Giada Ferraglioni – giada@carbon-pulse.com
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