PepsiCo’s operating profits at high risk due to climate change and transition
Analysis from Planet Tracker finds food and beverage giant’s transition plan fails to align the company with its goal of a 1.5°C pathway by 2030
- PepsiCo is exposed to a potential financial risk of USD 4.4 billion per year, by the end of the decade, or 42% of its three-year annual operating profit.
- Current emissions trajectory and sparse data reporting aligns the company with a 2°C warming scenario by 2030.
- PepsiCo on path to miss crucial targets set by the Science-Based Targets initiative by 58%
London, 1 March 2023: Financial think tank Planet Tracker’s analysis of this CA100+ company reveals that PepsiCo could be exposed to USD 4.4 billion of climate-related risk per year, by the end of the decade, on its current emissions trajectory.
Surprisingly, the food and beverage giant fails to disclose the material financial impact associated with potential Carbon Pricing Mechanisms (CPMs) linked to its Scope 3 emissions, despite these accounting for more than 90% of the company’s overall emissions by 2030.
The report also reveals that unless future emissions are mitigated, PepsiCo will miss its Science-Based targets (SBTs) by 58%. Under the Science-Based Targets initiative’s framework, the company is committed to ambitious goals including reaching net zero by 2040, a decade before the Paris Agreement deadline, and align with a 1.5°C pathway by 2030.
The company’s greenhouse gas emissions, according to Planet Tracker’s research, grew historically (2019 to 2021) at an average annual rate of 7.2%, while the company’s revenue increased at a compound annual growth rate of 8. 8%.
Taking this efficiency improvement into consideration and assuming a long term revenue growth of 4.8%, Scope 1, 2 and 3 emissions would decline by 14% compared to their 2021 level, while the SBT recommends a 45% reduction versus the 2021 baseline. This implies , the company aligns with a 2°C pathway by 2030.
Ion Visinovschi, Research Analyst at Planet Tracker comments, “The potential climate-related financial risk PepsiCo is exposed to is too high to ignore. Expected CPMs could reduce its annual operating profit by 26% by the end of the decade, with an additional 16% reduction coming from Physical Risk. Investors and lenders should demand a credible Climate Transition Plan where the risk of its main source of emissions is publicly quantified and the expected mitigation quantities and required investment for the mitigation is fully disclosed.”
Despite its ambitions to reach Net Zero by 2040, PepsiCo lacks a Net Zero Roadmap and its disclosed investment only covers a quarter of the gap between its trend of emissions and the SBTs’ recommended level. This makes it unclear whether the company will achieve its targets on time.
The Climate Transition Analysis of PepsiCo is the fourth in a series examining the climate transition plans of the Consumer Goods companies in the Climate Action 100+ list. Planet Tracker’s research into PepsiCo follows analysis of rival Coca-Cola, whose emissions trajectory was also found to be at odds with a 1.5°C pathway.
The report can be downloaded in full here.
ABOUT PLANET TRACKER
Planet Tracker is a non-profit financial think tank producing analytics and reports to align capital markets with planetary boundaries. Our mission is to create significant and irreversible transformation of global financial activities by 2030. By informing, enabling and mobilising the transformative power of capital markets we aim to deliver a financial system that is fully aligned with a net-zero, nature-positive economy. Planet Tracker proactively engages with financial institutions to drive change in their investment strategies. We ensure they know exactly what risk is built into their investments and identify opportunities from funding the systems transformations we advocate.
ABOUT THE CLIMATE TRANSITION ANALYSIS
As part of its Food and Land Use programme, Planet Tracker is examining the transition plans of the food system (Consumer Goods) companies covered by the Climate Action 100+ list (https://www.climateaction100.org/whos-involved/companies). The goal is to provide investors with the key information and analysis they need to be able to hold food system companies to account for the quality of their climate transition plans and their execution against those plans, and to encourage them to use this information to engage effectively with these companies with the ultimate aim of driving the sustainable transformation of the global food system.