Norway's Wealth Fund Challenges PepsiCo on Biodiversity Risk Assessment

Norway's sovereign wealth fund, the world's largest and the seventh-largest shareholder of PepsiCo, plans to support a shareholder proposal demanding PepsiCo conduct a biodiversity risk assessment. This challenges PepsiCo's board recommendation to reject the proposal at the annual general meeting on April 30, 2024.

The proposal, filed by US-based Green Century Capital Management, calls for PepsiCo to comprehensively assess its dependencies and impacts on biodiversity and natural capital. Other institutional investors, including Allianz Global Investors, LocalTapiola Asset Management, and Rothschild & Co Asset Management, have also declared support for the proposal.

The Norwegian fund believes PepsiCo should account for material sustainability risks and the broader environmental and social consequences of its operations and products. "PepsiCo has taken commendable sustainability steps, but it may be exposed to risks if it doesn't fully assess its dependency on natural systems and seek to limit impacts on the business," the shareholder proposal states.

PepsiCo's board has rejected the need for such an assessment, claiming it would not be in the best interests of the company or its shareholders. The company points to its existing sustainability initiatives, including a goal of spreading regenerative farming practices to protect biodiversity.

Why this matters: The vote on the proposal is seen as an important step in investors' agenda to address biodiversity loss and drive positive change, as corporate nature-related financial risk assessments are becoming a key target under the Kunming-Montreal Global Biodiversity Framework. It reflects growing investor concern over the financial implications of biodiversity loss for companies.

The Norwegian fund, which manages $1.6 trillion in assets, will also vote against the compensation of PepsiCo's named executive officers and the reelection of the chairman and CEO, as it believes the roles of chairperson and CEO should be separated.

The shareholder proposal argues that without a comprehensive assessment, PepsiCo may expose itself to unnecessary systemic, regulatory, and financial risks related to nature loss. The upcoming vote at PepsiCo's annual general meeting will test the strength of the biodiversity-focused shareholder movement and could set a precedent for similar proposals at other major corporations.

Key Takeaways

• Norway's $1.6T wealth fund backs shareholder proposal for PepsiCo biodiversity assessment.
• Proposal calls for PepsiCo to assess its biodiversity impacts and dependencies on natural capital.
• Other major investors also support the proposal, challenging PepsiCo's board recommendation to reject it.
• Vote seen as important step in investors' agenda to address biodiversity loss and financial risks.
• Norway's fund also opposes PepsiCo's executive compensation and leadership structure.