Amid the flood of impact and sustainability reports timed for release during Earth Month was a shower of updates about corporate-issued green and sustainabilty bonds that reflect how that money is being spent.
Apple, for example, disclosed it has so far "disbursed" $3.2 billion of the $4.7 billion amount it has raised in multiple bonds. What has that money helped support? The vast majority was allocated to clean energy projects, including a massive utility-scale battery in Monterey, California, that can store up to 240 megawatt-hours of electricity. The criteria about which projects will receive investment are reviewed annually by the company’s environment, policy and social initiatives team, and the decisions about where that money goes are ultimately made by that team’s lead, Lisa Jackson.
Meanwhile, Mars completed a $2.5 billion total issue with $500 million in sustainability notes that will contribute to financing renewable energy, energy efficiency, wastewater management, green buildings, natural ecosystem management, circular economy initiatives and carbon sequestration, among other things.
At another big green bond issuer, PepsiCo, the process of making decisions about where to allocate green bond proceeds has been increasingly integrated into the company’s broader investment decision-making framework over the past five years. But it doesn’t stop there. Climate risk factors and other environmental considerations and criteria have been embedded across the company’s financial governance policies, including potential mergers or acquisitions, said Anna Palazij, vice president of ESG reporting and strategic investment at PepsiCo.
"Are the operations in high-risk areas? Does the strategy align with key PepsiCo Positive principles? Does it fully support the transition scenario?" Palazij said, pointing to a few of the questions that would guide M&A decisions.
PepsiCo Positive, adopted publicly in September 2021, encompasses the Purchase, New York-based food and beverage company’s strategic agenda and includes a goal to achieve net-zero emissions by 2040, a commitment to becoming net water positive by 2030 and a target to cut non-renewable virgin plastic per serving by 50 percent for beverages and "convenient foods" by the end of this decade.
We need to reflect the true externalities.
As I reported in February 2021, the company realized that if it hopes to realize those ambitions, environmental and social considerations needed to become part of day-to-day decisions from the beginning, not just as an afterthought. PepsiCo’s chief sustainability officer, Jim Andrew, is a key stakeholder and signatory on capital requests. Palazij and her team are responsible for translating ESG metrics into "the language of finance" and for determining, among other things, whether certain decisions align with the science-based targets that PepsiCo has set for itself and, increasingly, for its suppliers.
"We know where the pendulum will land, our long-term success depends on this," said Palazij, during a Sustainability Week panel last month in London.
PepsiCo has so far issued two green bonds, raising a total of $2.25 billion since 2019 to fund projects aligned with United Nations Sustainable Development Goals: regenerative agriculture (SDGs related to hunger and decent work); decarbonization and climate reliances (SDGs centered on affordable clean energy and sustainable communities or cities); circular economy and virgin plastic reduction (SDGs covering responsible consumption and innovation); and becoming net water positive (SDGs for clean water and sanitation, among others). The entire framework can be found here.
Follow the money
As of its latest green bond report published last October, PepsiCo has spent almost $1 billion of that amount, allocating $484 million toward decarbonization, $437 million to reduce packaging waste and $73 million to improve water sustainability. (PepsiCo added the regenerative agriculture focus when it issued its second green bond, for $1.25 billion, in July.)
Here’s a snapshot of how PepsiCo chooses and manages projects linked to the bonds:
- The sustainability team assesses and selects eligible projects and makes recommendations to the finance department.
- The finance group is responsible for tracking the allocation of proceeds; the funds are invested elsewhere for the short term while awaiting allocation.
- The company has tapped a second party opinion (PepsiCo has been using Sustainalytics) to confirm its alignment with the Green Bond Principles.
- PepsiCo reports on the use of proceeds on an annual basis, including information about the impact metrics of each project.
- The company obtains an assurance analysis for its annual gr
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