Ambition versus reality
On 19 September at the Responsible Investment Association Australasia (RIAA)’s annual conference in New Zealand, I have the wonderful privilege of moderating a panel of three CEOs from prominent New Zealand listed companies: Simon MacKenzie (Vector), Jolie Hodson (Spark), and Grant Webster (THL Holdings). We are going to be talking about what it takes to lead an organisation in a world that needs to transition to a low carbon, sustainability focused economy.
While generally society understands and broadly agrees on the importance of this transition and the need to separate emissions growth with business growth, it is by no means an easy feat to achieve – especially while economic conditions are tough.
Currently, businesses are grappling with working through a recession and focused on trying to protect their bottom line. While the Reserve Bank of New Zealand has cut the official cash rate for the first time in four years, Forsyth Barr expects this New Zealand reporting season to be the sixth straight with declining earnings and the second consecutive with a -4% year-on-year decline or more. Times are very tough for most businesses.
At the same time, renewable energy shortages combined with a gas deficit have led to wholesale electricity prices skyrocketing and some industries halting production to save costs. Companies are publishing their first mandatory climate disclosures amongst loud criticisms of the costs of compliance with some questioning the benefits of the exercise. In addition, Air New Zealand announced it is withdrawing from the Science Based Targets Initiative (SBTi) and that its 2030 goals are unreachable.
The shift to a low carbon economy is a long term goal. With many competing tensions, immediate needs versus long-term priorities, what level of commitment could or should companies make towards greenhouse gas emissions reductions? For some sectors, especially those that are carbon heavy and export oriented like agriculture, there are clear demands coming from large corporate customers like Tesco, Nestle, Walmart, and Danone pushing for their supply chains to decarbonise, Additionally, some of our newer international free trade agreements now require us as a country to have strong commitments to sustainability.
One could be critical of Air New Zealand, but, through a greenwashing lens, it was a brave move – to front up to reality and publicly state this is much harder than we ever thought. The enormity of the task is becoming clear. Forecasting out to 2030 is not an exact science; planned projects can be sidetracked, and there are countless variables, particularly in the aviation sector. For hard-to-abate sectors, there are many things beyond a company’s direct control. Air New Zealand’s move is a clear example of reality and short-term practicality superseding ambition.
For companies in less carbon intense sectors operating from our already predominantly green electricity grid, the signals aren’t so compelling and the meaningful outcomes of efforts less tangible. Some argue, what difference will our efforts make when you look at emissions from China and India?
The timing of the discussion could not be more poignant. The three CEOs I’ll be speaking with at RIAA Conference all rank in the ‘Leaders’ category for Forsyth Barr’s C&ESG ratings of NZ companies – a reflection of their strong approach to operating sustainability. Our discussion will focus on how each of the CEOs are weighing up short term viability with long-term sustainability as they grasp the practicalities of managing ambitions with realities.
Come and be part of the conversation. Registration and details can be found here.
Katie Beith, Head of ESG at Forsyth Barr Investment Management
Katie has been in the Responsible Investment industry for almost 20 years, with the first part of her career spent overseas, predominantly in the UK. On returning to New Zealand in 2015, she joined New Zealand Super Fund as a Senior Investment Strategist for Responsible Investment. In November 2021, Katie joined Forsyth Barr as the Head of ESG where she is responsible for incorporating ESG (environment, social and governance) principles into Forsyth Barr’s firm-wide operations and investment process, including assisting advisers with specific client needs. Katie currently serves on the External Reporting Board’s Stakeholder Advisory Panel (XRAP), is Deputy Chair of the NZ National Advisory Board for Impact Investing and is also on the Investment Committee for NZ impact investor, Purpose Capital.
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the view or position of the Responsible Investment Association Australasia (RIAA). This article is intended as general information and should not be considered investment advice. It is recommended to seek appropriate professional advice before making any investment decisions.