Organisation details
Name: Green Century Capital Management
Signatory type: Investment manager
HQ country: United States
AUM: $1 billion
Covered in this case study:
Asset class(es): Listed equity
Geography: Global
Green Century Capital Management is an asset manager with more than $1bn in AUM, founded by environmental and public health nonprofit organisations. Green Century’s mission is to help investors generate environmental impact alongside risk-adjusted returns through their investments.
Why biodiversity is a focus of our engagement
Green Century has focused on environmental issues since our founding. Over time, our priorities and understanding of the systemic risks stemming from biodiversity loss have been informed by key stakeholders such as clients, beneficiaries and broader market and regulatory developments. For example, we have engaged with portfolio companies on deforestation for over a decade based on increased recognition of commodity-driven deforestation, particularly from palm oil. Over time we have evolved and expanded our focus to include wider environmental topics, including biodiversity.
The launch of several key initiatives, such as the Taskforce on Nature-related Financial Disclosures (TNFD) and the Science Based Targets initiative (SBTi), as well as the increasing number of nature-related regulations have also informed our work.
We have identified engagement as one of our most effective levers of change. We use engagement to mitigate long-term risk across our portfolios and help to deliver an impact for nature by drawing key issues to a company’s attention. We then work with these companies to develop biodiversity-related actions, such as creating a policy.
Given our experience and institutional knowledge in this sphere, we seek to take a leadership role within the investment community to further investor and corporate action on biodiversity.
How we engage on biodiversity
Green Century prioritised the food and agricultural sectors for our engagement on biodiversity, focusing on both sector leaders and laggards. We have a long-standing relationship with some of these companies due to our engagement efforts on deforestation and so the sector was a natural starting point. Companies within the sector are identified and prioritised based on the relative strength of their policies as measured against best-in-class industry policies and metrics developed by standard-setting bodies such as SBTi and the Accountability Framework Initiative.
When engaging with a company, Green Century will start a dialogue on biodiversity-related issues, such as deforestation, native vegetation conversion or plastic waste. We ask companies to undertake an assessment of their biodiversity-related risks and opportunities using a TNFD LEAP-style assessment. Collaborative engagement also plays a role in our efforts. For example, Green Century is helping to lead engagement efforts with 12 companies within Nature Action 100. This involves working with teams of global investors to strategically engage and spur action at companies with significant nature-related risks and opportunities.
If we feel that the actions a company is taking or is willing to take are insufficiently ambitious and / or do not adequately manage identified risks, we will file a shareholder resolution. The goal is not only to protect the rights of the shareholders we represent, but also to encourage ongoing good faith negotiations and to achieve a mutually agreeable set of actions the company will take to address the risks highlighted by the proposal. If agreement can be reached, Green Century will withdraw its resolution from the ballot. However, if agreement cannot be reached, we will bring the matter forward at the annual general meeting, where the company’s shareholders have an opportunity to weigh in.
Example
Green Century’s engagement has led to tangible progress in managing environmental risks and opportunities, spanning important topics such as deforestation, plastics and biodiversity.
One example is Green Century’s recent engagement with PepsiCo, the parent company of brands including Doritos, Frito Lay and Quaker Oats. PepsiCo has a large nature footprint given the scale of its agricultural supply chain and water usage.
Green Century approached the company in the autumn of 2023 to inquire into its intentions regarding a nature-related impacts and dependencies assessment. While the company had launched a number of commendable nature-related initiatives in recent years, it had not yet undertaken a comprehensive assessment. After dialogue clarified the company’s lack of intent to pursue such an assessment, we filed a shareholder resolution asking the company to start tracking and disclosing its impact on biodiversity. We believe PepsiCo, as the second-largest food and beverage company in the world, has a responsibility to mitigate its impacts on the natural systems upon which its business depends. Failure to do so increases systemic material risks that arise from nature degradation.
PepsiCo acknowledged the resolution and we entered into negotiations in hopes of reaching an agreement. However, the company ultimately expressed reluctance to perform the assessment, prompting us to present the issue to PepsiCo’s shareholders for a decision via a vote at the company’s shareholder meeting. We plan to issue an exempt solicitation before the meeting to articulate our argument. This is a type of filing with the U.S. Securities and Exchange Commission commonly used by proponents to support their proxy proposal. We will also engage with institutional investors about the proposal and intend to follow up with PepsiCo post-vote, tailoring our approach based on the outcome. The filing aims to provide shareholders with the opportunity to express their views on the importance of assessing and addressing the company’s environmental impact. Bringing this issue to a vote may foster greater environmental transparency and action at PepsiCo, aligning corporate practices with shareholder expectations.
