PepsiCo issues $1.25bn green bond

Regenerative agriculture will be a focus for bond proceed allocation. Image: PepsiCo

The food and beverage multinational announced the closing of the ten-year bond on Wednesday (20 July). It is the second green bond to have been issued by PepsiCo within three years; it closed its inaugural green bond, priced at $1bn, in late 2019.

The first green bond from the company was used to fund programmes around reducing PepsiCo’s use of virgin plastics in packaging; replacing fleet vehicles with electric options; increasing renewable energy use in the supply chain and improving water stewardship. In launching that bond, PepsiCo appointed its first chief sustainability officer – Simon Lowden, formerly chief marketing officer. Lowden has since moved on to the Australian food and beverage firm Arnott’s Group.

The new green bond will finance projects in many of the same areas, but regenerative agriculture has also been added to the list of focus areas, as the company strives to “inspire positive change for the planet and people” and operate within planetary boundaries.

In April 2021, PepsiCo announced an ambition to facilitate the uptake of regenerative practices across seven million acres of farmland globally – equivalent to the amount of agricultural land it uses. Regenerative practices are those which work with natural systems rather than against them, enhancing outcomes such as soil quality and biodiversity.  Building on this commitment, PepsiCo last month joined a new task force overseen by the Prince of Wales’ Sustainable Markets Initiative which aims to shift food systems toward regenerative practices. Other task force members include Mars and Nestle.

Investments from the new green bond will go towards farmer training initiatives, covering topics such as water stewardship and reducing fertiliser use.

For the use of the proceeds of both bonds, PepsiCo is required to disclose its activities and future plans annually.

PepsiCo’s chief sustainability officer Jim Andrew said the new green bond “will be pivotal to channelling investment into the critical areas required to build a more sustainable and resilient food system”, building on the “transformation” already enabled by the firm’s first green bond.

Climate, circularity, water

Aside from regenerative agriculture, the other key focus areas for the proceeds of the new green bond will be reducing emissions across operations and supply chains, improving the circularity of packaging and enhancing water stewardship.

Emission-reducing projects set to receive funding include on-site renewable energy generation; enhancing energy efficiency in buildings; making manufacturing lines more efficient and upgrading cooling and vending equipment. There may also be new funding for the EV transition in the corporate’s fleet. PepsiCo is targeting a net-zero value chain by 2040 globally.

On packaging, PepsiCo’s main focus with this bond will be reaching its target to use 50% recycled content in plastic packaging by 2030. There will also be more funding for improved recycling infrastructure, especially for flexible plastic packaging like crisp packets. This may come as a disappointment to campaign groups such as Greenpeace who have long been calling on FMCG majors like PepsiCo to use less plastic altogether – virgin or recycled – and invest more heavily in plastic-free and refillable alternatives.

The last focus theme for this green bond is water. PepsiCo is notably aiming for a net-positive water impact by 2030, replenishing more water than its operations use. Funding is likely to be allocated to improve water efficiency and add water reuse and recycling systems to more manufacturing locations. Investments will also need to be made in nature-based solutions that enable replenishment, like wetland restoration. PepsiCo is also looking to fund the scaling of drip irrigation or other water savings technologies for farmers in its supply chains for key crops.

All issuances from the bond will need to comply with PepsiCo’s green bond framework, updated in line with this week’s new package.