Project Auckland: Covid 19 coronavirus tests Auckland mayor Phil Goff’s optimism (NZ Herald)

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“I came in, just as dawn was breaking over the city and looked out and thought: ‘Jesus. This is a ghost town.’ Nothing was happening.”

That was Auckland Mayor Phil Goff’s reaction from his 27th floor office on the first day of the nationwide lockdown, a memory he says has stayed with him because of how scary it was to see his city closed down and abandoned.

Throughout the pandemic, Goff says he has been in constant contact with Prime Minister Jacinda Ardern.

His first difficult decision was made back when New Zealand had just five recorded cases of Covid-19. That was to cancel the Pasifika Festival in mid-March — a decision made even harder since it was also cancelled in 2019 following the Christchurch mosque shootings.

Ardern was worried from a foreign affairs perspective that the festival, which celebrates Pacific Island communities, would spread Covid-19 back to the Pacific Islands when performers and stallholders returned. Goff knew the scale of the event would make it impossible to enforce social distancing. Just two weeks later, Auckland was in strict lockdown.

Goff says, in hindsight, that was absolutely the right decision to make — noting that it had a very real chance of becoming a super-spreader event.

“What was really important was that one message was going out to the community, so the Prime Minister wasn’t standing up saying one thing and the mayor of the country’s biggest city saying something quite different.”

Goff says the government’s leadership and communication has been pretty good throughout the response, though he jokes that he hates answering phone calls from Director-General of Health Dr Ashley Bloomfield.

“Because it usually means that we’re headed for a bloody lockdown!”

But he also acknowledges that he has had concerns with aspects of the response: “I indicated before the last two lockdowns what some of those worries were and raised them, and had discussions with Ministers about how I think we might be able to do things better.”

Back in January, before the Northland scare, Goff wrote to the Minister of Covid-19 Response, Chris Hipkins, and Health Minister Andrew Little urging the Government to bring local councils to the table when a local outbreak occurs.

“But everything is relative,” Goff says. “Just because we’re among the best in the world doesn’t mean to say we can’t continue to do better.”

Lockdown
Goff says that when New Zealand was plunged into level 4 lockdown, top of mind for him were the city’s most vulnerable.

Auckland Council set up a food distribution centre at the unused Spark Arena to keep up with demand. Those unable to get to the supermarket or suffering financial hardship were eligible for food parcels, which were couriered to people’s homes.

When Auckland City Mission was overwhelmed by the unprecedented demand for meals, Auckland Council’s cafeteria staff stepped in, “working all the way through the lockdown preparing thousands of lunches for people,” Goff recalls.

Auckland Council worked closely with Carmel Sepuloni — the minister appointed as the liaison between Goff and the Government — to ensure the homeless were housed during the lockdown.

“We couldn’t leave them on the street, those sleeping rough would be among the most vulnerable because so many have co-morbidities,” Goff says.

They managed to get all but about 20 into motels and provided wraparound services to help with associated social problems.

Another group that was identified as at risk were those that were living alone. Goff says, “no one knew how they were getting on”.

The city’s librarians — unable to work with libraries closed — were put to work phoning the most isolated in the city. “We couldn’t contact everybody, but we singled out those people that were living alone and weren’t connected to the internet — and we called 17,000 of them,” Goff says — adding that on the whole they were coping well, “the only problem was how to end the conversation!”

Goff formed a business advisory panel to help work through issues and assist with the city’s transition back to normal economic activity when the lockdown was lifted.

The panel met regularly, acting as a conduit back to government and to provide feedback to the business community.

With hopes that events including the America’s Cup and Apec would create a boom year for Auckland in 2021 dashed, then-economic development agency Ateed (now merged with Regional Facilities Auckland to become Auckland Unlimited) brought business and political heavyweights together at an emergency economic summit to discuss what should come next.

The “Auckland’s Future, Now” summit held following the first lockdown, provided a forum for an Auckland-specific, business-focused discussion by business leaders and stakeholders to address the economic challenges the city was facing, resulting in a plan to grow the economy from the hit it had taken.

Speaking to a business audience last week, Finance Minister Grant Robertson said discussions at the Auckland Summit and other forums had fed through to the government’s economic development strategies.

“We are looking at a new and different approach to regional development, which we’ll have more to say about when we get to the Budget,” Robertson said.

Emergency budget
With borders closed and unemployment expected to spike, it was clear Covid would have a savage impact on Auckland’s finances.

“We knew we could well get double-figure unemployment,” Goff says. “I remember during a meeting, one councillor was in tears because they’d never seen anything so grim.”
An emergency budget was developed to respond to the impact of Covid-19 on Auckland Council’s finances – Goff notes how well councillors worked together on it, requiring many long hours.

Growing up in a family that suffered heavily because of the Great Depression, Goff says this experience showed him that the then-government’s focus on balancing the books back then made the Depression deeper and longer.

“If we cut everything back, we’d be part of the problem — not the solution,” he says. “We knew we had to maintain core services and make sure rubbish continued to be picked up, water supplies weren’t failing and the grass was cut at parks.”

The decision was made to suspend the accommodation provider targeted rate, and give ratepayers the option to defer rates payments.

Goff says the uptake of the option to defer rates has been quite small — “an indication of how quickly the recovery has happened.”

But elected members had to make some difficult decisions.

Staff numbers were reduced and lower-priority projects deferred to achieve savings of $120 million.

“We also started selling off surplus property that the council had previously resisted doing,” Goff says.

“We knew what we needed to do was invest in infrastructure.”

Construction was seen as the obvious solution to reinvigorate the economy, create jobs, and achieve long-term goals for the city.

“We were facing a crisis, but longer-term we needed to keep infrastructure going, keep up the response to climate change and keep environmental projects going,” Goff says.

The emergency budget has now evolved into the 10-year “recovery” budget. It puts back $900m that was cut, including $550m for transport, $145m for water infrastructure, $54m for stormwater and $65m for community facilities.

It proposes a one-off rates increase of 5 per cent, which Goff says is not extravagant compared to Wellington’s 14-17 per cent — “and their infrastructure is just collapsing all around them because they haven’t done the renewal work.”

He says the 10-year budget has preserved the critical things that are really needed, although “a little bit of icing on the cake has been lost” in areas like town centre rejuvenation.

“There are things that we’ve had to put off that would have been good to do, but the essential things will be done.”

Climate change
One area that Goff would have loved to go further with is climate change.

The 10-year budget puts an additional $150m into climate change initiatives, however the discussion document shows an alternative investment package of $320m was rejected that would have allowed more significant climate action work.

Goff says the initiatives will still have an impact: “We will lower emissions, and significantly lower them on a per capita basis,” he says.

“The challenge we have got is that the prediction of population growth is about 22 per cent. That’s more people using all the things that create carbon emissions. We are working really hard with the government and the Climate Change Commission to look at how we can bring forward some of the projects.”

He wants the adoption of electric cars sped up, acknowledging that the current price differential makes the decision difficult.

Another area Goff says central government can help with is cycleways.

Cyclist numbers are significantly up — in 2014 Auckland had 800,000 cycle trips per year, the figure now stands at some 3.7 million. But there is criticism from some that cycleway progress is painfully slow — and Goff agrees.

“We want to work with central government to maximise the programme,” Goff says. “Neither the Transport Minister Michael Wood nor I are satisfied with the speed at which we’re able to put cycleways in place.”

Vision for Auckland
Goff’s vision has always been for Auckland to be a world-class city where talent wants to live. Covid hasn’t changed his view.

He is proud of the progress made toward the infrastructure deficit he inherited, pointing to the recent opening of Te Komititanga square outside Britomart Station, the Quay St precinct that is close to completion, and his insistence that Watercare bring forward its programmes:

“When I saw their response to last summer’s drought, I said it’s just not satisfactory that a city might be placed in a situation where we would have to limit the number of days a factory could operate because of water shortage — we will fix that.”

When asked how he keeps a smile on his face, Goff says he’s a perpetual optimist, “which I think you have to be to survive in politics”.

“I think we have got the glass half full here. I can see so much around the city where there is decent progress being made,” he says.

“Those are the things that keep you smiling — not the comments you see on your Facebook page.”

Deloitte Top 200: Beca wins Sustainable Business Leadership award (NZ Herald)

Beca is motivated by its purpose to “make everyday better” and a values-driven culture to deliver transformational solutions with its clients and rise to the challenge of sustainability.

Beca is one of Asia-Pacific’s largest independent advisory, design and engineering consultancies. It has over 3300 employees in 21 offices around the world, and has delivered projects in more than 70 countries. It says the most positive impact it can have on the planet is to work with its clients, its people and its communities to help deliver transformational solutions and succeed in a sustainable way.

The Deloitte Top 200 judges commended Beca for putting sustainability at the centre of its operations; even recognising sustainability’s importance 10 years ago when it wasn’t mainstream. The judges said it is clear that Beca recognises how crucial building resilience to climate change is to its business, and this is one of the key reasons the firm has been chosen as winner of the Sustainable Business Leadership award.

“Sustainability requires both mid-term foresight and a critical assessment of its current practices,” says Top 200 judge Ross George who is managing director of Direct Capital. “Beca balances these two elements and has the ability to encourage clients to do so in their projects as well.”

The award highlights businesses that are working towards the creation of long-term environmental, social and economic value. The judging criteria covers governance, long-term perspective, integration of ESG (Environment, Social, Governance) considerations and projects to support sustainable development.

In Beca’s most recent sustainability review, Chair David Carter and CEO Greg Lowe say: “The global challenges facing our world present numerous opportunities for Beca and our clients to mitigate risks, adapt, evolve, innovate, and thereby make everyday better for future generations.”

Beca was one of 60 founding signatories to the New Zealand Climate Leaders Coalition that commited to voluntary action on climate change.

The firm set a carbon target, committing to reducing its emissions 32 per cent by 2030 from a 2018 baseline — consistent with the need to keep planetary heating below two degrees. It has adopted an absolute emissions reduction approach, to include those emissions Beca has direct control over, as well as indirect emissions from its full supply chain. This includes building energy efficiency, its global supply chains, the vehicle fleet, business travel and even how its employees get to and from work.

Initiatives introduced by Beca include recommending its staff to use public transport to visit clients, reducing the number of vehicles it has and replacing them with more fuel-efficient models. Its Hamilton office even has a worm farm on-site, which converts food scraps from the kitchen to bottled fertiliser.

Beca has made a strategic response to the critical challenges New Zealand’s most populous city faces. Beca says it wants to help Auckland grow sustainably, and is working with clients including Auckland Council, Auckland Transport, Watercare, Panuku and NZ Transport Agency to deliver sustainable solutions to the challenges the city faces.

One example is New Zealand’s largest wastewater project, the Central Interceptor. It is an integral part of Watercare’s long-term wastewater strategy for the region. The 13km tunnel is expected to decrease wastewater overflow by approximately 80 per cent.

Beca says an important focus for the Central Interceptor is maximising opportunities for long-term sustainable outcomes. Its services include the integration of sustainability requirements into all project areas to support the eventual delivery of an ‘Excellent’ rating under the Infrastructure Sustainability Council of Australia (ISCA) Infrastructure Sustainability Rating Tool. One key requirement of this is to complete a carbon footprint baseline for the project, from which carbon reduction initiatives from the design and construction phases will be measured.

Beca’s sustainability team recently put together a think piece on how New Zealand’s post-Covid recovery and rebuild opportunities could support decarbonising New Zealand and contribute to a future of sustainable prosperity.

The think piece says, “The scale of investment we are making and the legacy of this for future generations, means it is critical that we take this opportunity to significantly accelerate the decarbonisation of our economy. By taking this approach, our recovery will support a more prosperous, equitable and sustainable society.”

It identified eight key transitions that would best enable New Zealand to rapidly shift to a low-emission economy, while simultaneously creating jobs, addressing many of New Zealand’s critical challenges and moving to a prosperous, circular and equitable economy. These include transport, electricity, agriculture and forestry and social infrastructure.

The judging panel commended Beca for not only encouraging sustainability and climate change within its own organisation, but for working alongside its clients and communities to continually challenge and improve sustainable outcomes.

Finalist: Kathmandu

Kathmandu Holdings is a global outdoor, lifestyle and sports company. As a group, it owns outdoor adventure brand Kathmandu, North American hand-made footwear wholesaler Oboz and Rip Curl surfwear.

This year, the group launched its first combined sustainability report. Inside, Kathmandu chair David Kirk and CEO Xavier Simonet say despite the impacts of Covid-19, all three brands have made significant strides in sustainability this year.

“Covid-19 threw many challenges to our brands, but each of them have found ways to learn from these challenges and make the most of the opportunity to rethink the way we operate,” they say.

The Top 200 judges commended Kathmandu for boldly making sustainability commitments and note the firm has begun putting actions in place to embed sustainability right throughout the organisation. This is one of the key reasons it was chosen as a finalist for the Sustainable Business Leadership award.

Last year, Kathmandu Holdings’ original brand and namesake Kathmandu became the largest Australasian retailer to achieve B Corp certification — the stringent certification process as part of the Certified B Corporations movement.

B Corps implement the Global Reporting Initiative, an independent standards organisation that helps businesses, governments and others understand and communicate their impacts on issues such as climate change, human rights, governance and social wellbeing. Kathmandu will need to re-certify every three years to maintain the status.

In its 2020 Sustainability report, Kathmandu says that being a B Corp comes with a lot of responsibility, but acknowledges that without that responsibility right at the top, it can be easy to overlook.

By 2025 it aims to become a leading Global B Corp and integrate circular economy principles within its business.

Back in 2014 Kathmandu also became the first Australasian company to join the internationally renowned Fair Labor Organisation as part of a commitment to enhance its social compliance programme and use ethical suppliers.

“These accreditations confirm Kathmandu’s commitment to balancing human, environmental, transparency, and profit considerations,” says judge Ross George.

Across its other brands, other advances from Kathmandu Holdings this year include Oboz launching its first range of footwear containing recycled materials and algae boom insoles and Rip Curl celebrating its 20th anniversary of its planet day.

Inside this year’s sustainability report, Kirk and Simonet say that Kathmandu Holding’s brands will be able to leverage their strengths to work together for an even greater positive impact.

Finalist: Vector

Vector is New Zealand’s largest distributor of electricity and gas.

It owns and operates networks which span the Auckland region.

Vector says its approach to sustainability is to deliver innovative, long-term solutions for its shareholders, customers, partners and suppliers to build shared resilience, reduce its carbon footprint and help regenerate the environment.

It has been taking an active leadership role in how it decarbonises and electrifies transport while maintaining the reliability and affordability of energy.

Energy systems in New Zealand and globally are under pressure to respond to the uptake of new consumer energy technology, electrification of transport, demands for decarbonisation, increased consumption of renewable energy and energy poverty.

The judges say Vector’s business is centred in the middle of a digital and technological revolution and that this puts it in a great position to look at a cleaner energy future.

“Vector is not frightened of facing disruption during a time where decarbonisation is accelerating and its customers are increasingly aware of this,” says judge Ross George.

While some energy companies are taking a “wait and see” approach, Vector has introduced its “Symphony” strategy to address this disruption and create a new energy future.

Vector says this strategy enables it to drive better environmental, social and economic business outcomes such as energy affordability, decarbonisation and the circular economy, aligned to the UN Sustainable Development Goals.

Vector is an active participant in the Aotearoa Circle, Sustainable Finance Forum, Sustainable Business Council and Climate Leaders’ Coalition.

In the past year it has reduced its carbon footprint by 23.6 per cent.

Earlier this year, Vector’s renewable energy business Vector PowerSmart worked alongside Watercare to deliver New Zealands’s first floating solar array on the Rosedale wastewater treatment pond.

The array was opened in October and features more than 2700 solar panels and 4000 floating pontoons.

It will generate 1486MWh per year — the equivalent of 200 average New Zealand homes and enough electricity to power a quarter of the energy plant — with zero emissions.

The Battery Industry Group (BIG) is another sustainability initiative led by Vector.

Launched last year, BIG is a cross-industry collaboration to design reuse and recycling solutions for large batteries, commonly found in electric vehicles or in stationary energy storage.

BIG now has more than 140 organisations and individuals as members across energy, waste, transport and battery industries.

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It has been three years since Prime Minister Jacinda Ardern called climate change “my generation’s nuclear-free moment”.

While the previous Government was unable to declare a climate emergency in the last term — believed to be because Labour’s coalition partner New Zealand First blocked it — she has now made it a priority with a declaration of a climate emergency.

Since Covid swept the world, it has done a lot to emphasise the social and economic inequalities that exist globally. The harsh reality of the lockdown exposed that, even in New Zealand, women and low wage workers were most impacted by job losses and reduced work hours.

Similarly, the relationship between climate change and inequality will see those who are disadvantaged suffer disproportionately from the adverse effects of global warming. The need for action to achieve New Zealand’s vision of a thriving, climate-resilient, low emissions future is widely understood.

The same areas that New Zealand used to successfully respond to the Covid-19 outbreak are needed to address global warming: listening to scientists, public policy and international co-operation.

When US President-elect Joe Biden spoke with Ardern for the first time since the US election last month, he spoke positively about her handling of the pandemic and said he looks forward to working closely with her on common challenges, including tackling climate change. Biden has named ex-US Secretary of State John Kerry — one of the leading architects of the Paris climate agreement — as his climate envoy.

“America will soon have a government that treats the climate crisis as the urgent national security threat it is,” said Kerry.

This break from the Trump administration’s climate policy will put our Government to the test, and necessitate that our ambition reflects our action.

Speaking recently at the Institute of Financial Professionals in New Zealand (Infinz) conference, Climate Change Commission chair Dr Rod Carr said the commission’s current programme of work is to produce the first emissions budget out to 2035 — and to the extent that we are not on track to achieve our domestic targets and global obligations, advise on a reduction plan that will reduce those emissions having regard to a wide range of impacts.

“It is important to understand that climate action is now mainstream conversation, and understand what is to be done, by who, and by when,” he said.

New Zealand emits about 80 million tonnes of carbon dioxide-equivalent greenhouse gases every year, and under the international accounting rules sequesters about 10 million tonnes, largely through forestry. Nearly half of those emissions come from agriculture.

The challenge for New Zealand, says Carr, will be that although our form of pastoral agriculture may be one of the most efficient ways of producing meat and milk protein in pastoral agriculture, there may now and in the future be ways of producing meat and milk proteins with an even smaller greenhouse gas footprint.

Of the remainder of our greenhouse gas emissions, transport makes up about 40 per cent. It is a growing contributor, with household transport emissions increasing by 15 per cent between 2011 and 2017.

Carr says this will be one of the major challenges that will go to the heart of both the allocation of capital by private vehicle owners, fleet operators and government infrastructure providers.

“Converting ground transportation to low or no emissions is a 100 plus billion-dollar investment challenge over the next 30 years,” he says. “Known technologies exist. They largely require electrification, and that electrification needs to be provided from renewable energy sources, unless it is to continue to contribute to greenhouse gas emissions.”

Navigating our economic recovery from Covid-19, while finding solutions for our climate change challenges will require a substantial and coordinated response. This will mean making sure capital is deployed to support the new age, new technologies, and new and necessary ways in which we conduct business.

Covid-19 exposed major weaknesses in our society. But it has also given us the impetus to make fundamental changes that will address inequality and fuel an economic recovery that is long-lasting and sustainable. Without a handbrake on the Government — and with a renewed impetus from international leadership to deliver — now is the time to make sure New Zealand isn’t left behind.

Deloitte Top 200: Liz Coutts named Chair of the Year (NZ Herald)

Liz Coutts is a highly regarded director with over 20 years’ experience in governance roles across public and private enterprise.

She currently chairs Ports of Auckland, Oceania Healthcare, Skellerup Holdings and Ebos Group and is highly respected for her governance style, which she describes as “inclusive, calm and decisive”.
The Deloitte Top 200 judges say these attributes have been demonstrated by Coutts in the way she has dealt with Covid-19 this year across a range of industries to achieve success, and, it is what distinguished her as 2020 Chairperson of the Year.

“Skellerup has had another year of strong performance, and Ebos Group’s total shareholder return over the past decade exceeds 20 per cent per annum,” says Deloitte Top 200 judge and independent director Cathy Quinn.

Coutts has been on the board of many of NZ’s leading organisations, and her dedication to governance saw her appointed an Officer of the New Zealand Order of Merit in 2016.

She enjoys being involved in industries that have a significant impact on the economy. “Each one of the companies I am involved in plays a key role — whether it be in a market or an industry,” she says.

The judges say Coutts is someone who regularly moves from a director role to then chairing the audit and risk committee of an organisation, and then becomes chair. She has held many of her directorships for a long period of time — she joined the Skellerup board in 2002 and appointed chair in 2017, became director of Ebos Group in 2003 and chair in 2019, and joined the board of Ports of Auckland in 2010, becoming the first woman to chair the port in 2015.

Coutts says one of the things that keeps her interested in her roles are the people on the board and in management. “That’s what keeps you there — you are interested in the people you’re working with and you feel like you have a key role to play to make a difference,” she says.

This year, Coutts says the biggest challenge with Covid-19 was dealing with the unexpected on such a global scale. “We all have risk registers that include pandemics, but to actually operationalise something and bring it into effect when it hasn’t been done before on such a scale has been difficult because of the unpredictability,” she says. “And now we are thinking about what next year is going to look like, how it will affect us, how and when the world’s economy will open up and what will the future be like — we try to predict that but it is hard.”

Each of the companies Coutts chairs have been affected differently.

Skellerup Holdings provided an early warning about Covid-19 because of its operations in China, Italy and elsewhere around the world.

“We have been at the forefront internationally with this global pandemic, learning what has been happening around the world from international staff,” she says. “It has given us huge insight into what is happening globally.”
The rubber goods manufacturer was able to mostly continue to operate throughout the worldwide lockdowns because of the critical nature of many of its products. The strength and resilience of its agri-business helped it to achieve net profit on par with last year’s result.

Chairing Ports of Auckland is not an easy task and it requires strong and courageous leadership to advocate for it. This was made even more challenging this year when the worldwide surge in consumer demand resulting from the pandemic created challenges for all ports around the world.

Coutts says it has been very difficult to manage, but “regardless of that we just have to keep calm, keep focused and get through this.” Despite it being a tough role, she says she relishes the challenge because of the incredibly important role the Ports of Auckland plays in New Zealand’s economy.

Aged care provider Oceania Healthcare is another business that has required intense management over the pandemic in order to keep its operations functioning and its residents and staff safe.
“We worked hard with residents to make sure they still had a good experience and could communicate with their family and friends virtually,” she says. “We put in a lot of extra support so we could do their shopping for them and keep up their communication.”

Communication has been critical for all her companies this year — “People were working at home and they were working alone… it wasn’t just physical support but emotional support that people needed.”
When asked to name a highlight in her governance roles this year, Coutts says it is the way the companies she chairs have been able to continue with business as usual while operating in a totally different way.

“I have been so impressed with some of our leaders around the world with what they have achieved.

“It’s quite amazing when you get something like this global pandemic how well everyone pulls together.”

Finalist: John Loughlin
John Loughlin says he enjoys working with businesses that are trying to do things where he senses there is an aspiration for performance and a drive to do things that are special.
Loughlin has had a broad governance career with a focus on the primary sector, infrastructure and logistics.

He currently chairs Powerco, EastPack, Rockit Global, Hop Revolution, Coda Group, as well as the Meat Industry Association.

“I like an exciting challenge,” he says, noting that can come in many different ways. “In some cases, it comes from early stage companies like Rockit and Hop Revolution, but also in the infrastructure area where there are significant challenges in companies that are very mature.”

Judge Cathy Quinn says Loughlin is regarded as a wise head in the primary sector who has helped a variety of businesses deal with challenging circumstances and then prosper and is among the reasons he has been chosen as a finalist for Chairperson of the Year. “It’s not an easy industry given that Mother Nature can play a huge influence in any year and that global markets, trade barriers and protectionism are matters largely beyond the control of any domestic player or NZ Inc.,” she says.

All of Loughlin’s companies were classified as essential businesses during the lockdown. He says trading through Covid meant massive uncertainty, new risks, and significantly increased degrees of difficulty.
“EastPack and Rockit had to pick fruit at alert level four while maintaining social distancing,” he says. “We had to operate pack houses which have been designed for people to stand shoulder-to-shoulder — that was no longer possible and we had to find new ways to operate as well as navigate a supply chain to market where there was disruption at ports.”

He says while the uncertainty was dramatic and the degree of difficulty was massively elevated, these kinds of challenges make life exciting and they provided some of the most satisfying outcomes for the year.

“At Rockit we packed and sold a crop that was 25 per cent bigger at a price that was one per cent higher than last year, and we did that with some channels to market being closed to us,” he says. “We had to open new channels, we had to be fast on our feet, and we had to use digital advertising particularly effectively. To achieve our growth targets in a really difficult world was incredibly satisfying.”

Finalist: Patrick Strange
Patrick Strange says a chair can only be as good as their board and management, and his nomination as a finalist for Chairperson of the Year is a reflection of the board and management of those companies he chairs.
Strange brings extensive experience in regulated infrastructure to his current chairperson appointments at Auckland International Airport and Chorus. He enjoys these roles because they are both important infrastructure companies for New Zealand.

“We have seen with Chorus the clear benefits of the fibre network during the Covid lockdown, and the airport is the driver of both our business and leisure travel,” he says.

The Deloitte Top 200 judges say he is an inclusive chair that brings out the best in his fellow directors and management teams.

“Patrick is seen as a chair that has been effective in building relationships with Government for the organisations he chairs — he is seen as an honest straight shooter in government circles,” says judge Cathy Quinn.
Strange says this year has been particularly busy, with both companies facing very different and significant challenges due to Covid-19.

“The airport had a huge loss of income which required the board and management to respond very quickly with cost changes but also with the raising of capital to address the balance sheet,” he says.

The judges say the capital raise and the speed at which it was done at a very uncertain time has seen Auckland International Airport well positioned to manage through the uncertainty brought to the business from the impact of Covid-19.

Strange notes that the challenges faced by Chorus were different. While its income wasn’t significantly impacted, the rollout of fibre had to stop during the lockdown and its contractors needed to be supported.

He says the highlight for him at Chorus has been the performance of the fibre network under huge load while so many New Zealanders had to work from home during the Covid-19 lockdown. “It was absolutely unconstrained and fault free, which is a great reflection of the build that has gone on,” he says.

The judges noted that the Chorus share price has risen by 77 per cent in the past 12 months.

“This performance has been recognised with its win in the Most Improved Company category this year,” says Quinn.

Deloitte Top 200: Light in a dark year for NZ’s Top 200 companies

The high-level view of the 2020 Deloitte Top 200 Index shows total revenues for Top 200 companies increasing from $188,561 million in 2019 to $191,580m in 2020 — an increase of 1.6 per cent. This compares to a 4.0 per cent increase in 2019.

Underlying earnings (EBITDA) decreased from $27,027m in 2019 to $25,062m in 2020. This is a decrease of 7.3 per cent, compared to a 5.7 per cent increase in 2019.

The EBITDA margin, an assessment of operating profitability as a percentage of total revenue (total EBITDA/total revenue), decreased slightly between 2019 (14.3 per cent) and 2020 (13.1 per cent).

Total profits after tax have decreased from $10,367m in 2019 to $6,503m in 2020. This is a 37.3 per cent decrease year-on-year, compared to a 6.3 per cent increase in 2019.

Net profit margin (profit after tax/total revenue) decreased between 2019 (5.5 per cent) and 2020 (3.4 per cent).

Total Assets have increased from $230,004m in 2019 to $252,108m in 2020, which is a 9.6 per cent increase and compares to a 4.8 per cent increase in 2019.

The number one spot in the Top 200 Index has been held by Fonterra since its formation in the early 1990s. Its revenue increased by 5.3 per cent during the year to reach $20,282m.

This increase is mainly due to Fonterra’s improved ingredients business pricing and product mix sales.

The 200th ranked entity on the Top 200 index in 2020 is a newcomer to the Index, Airwork, with revenue of $200m. Last year’s 200th ranked company, Juken (the 176th ranked entity for 2020) had revenue of $206m. This is a 2.9 per cent decrease in revenue between the 200th ranked companies year-on-year.

EBOS Group (2nd) has increased in revenue by 25.0 per cent from $7,393m in 2019 to $9,241m in 2020, overtaking Fletcher Building (3rd) whose revenue has decreased by 12 per cent from $8,308m in 2019 to $7,309m in 2020. Fletcher Building had previously held the second-place ranking for four years.

EBOS Group’s increase in revenue is attributed to significantly higher sales volumes in its community pharmacy and institutional healthcare businesses. This results in an 11.2 per cent increase in the revenue of the second-place entity year-on-year, however the revenue gap between the top two companies has remained fairly constant, slightly increasing by 0.9 per cent, as Fonterra (1st) had a revenue increase of 5.3 per cent.

The top 10 has remained quite consistent, with Foodstuffs NI re-entering in tenth place. It had previously dropped from fourth place to 12th place in 2019 due to a change in how revenue was recorded (following NZ IFRS 15 adoption in 2019). Foodstuffs NI’s revenue has increased by 6.3 per cent, from $3,332m in 2019 to $3,543m in 2020.

Foodstuffs NI’s re-entry in the top 10 sees Meridian Energy move down from 10th place in 2019 to 11th place in 2020. It reported a 2.5 per cent decrease in revenue from $3,491m in 2019 to $3,405m in 2020.

Top profits

Fonterra (ranked first in the Top 200 Index) reported the top profit for 2020 at $803m, with its profit after tax increasing by $931m from a loss of $122m in FY19.

This increase in profit is attributed to significantly lower net interest-bearing debt, improved cash flow and an increase in sales revenue for Fonterra in the current year. The prior year loss was mainly due to the write-downs of $203m impairment of its China Farms investment and $237m on its New Zealand food service business.

The top profit figure of $803m reported by Fonterra compares to the 2019 top profit of $1,397m achieved by Shell. The top profit figure has decreased by 42.5 per cent year-on-year.

The average profit after tax across all 200 companies has decreased from $51.5m in FY19 to $32.5m in FY20 – a 36.9 per cent decrease.

Infrastructure investor Infratil (ranked 32nd) has entered the Top Profit Index in 2020, taking second place with a profit of $509m, a 609.1 per cent increase from its $64m reported in 2019.

Telecommunications giant Spark (ranked 9th) has moved up to third place in the Top Profit Index this year, up from fourth place 2019, with its profit after tax increasing by 4.4 per cent, from $409m in 2019 to $427m in 2020.

Specialty dairy company A2 Milk (ranked 22nd) has jumped from eighth place in 2019 to fourth in 2020. Its profit after tax has increased by 31.8 per cent from $295m in 2019 to $388m in 2020.

Lotto NZ (ranked 29th) climbed to fifth place in 2020. Its profit has increased by 27.6 per cent from $261m in 2019 to $333m in 2020.

Biggest losses

The biggest loss for 2020 was reported by Air New Zealand (ranked sixth in the Top 200 Index), with a loss of $454m. This is a $730m decrease for the national airline from its 2019 profit after tax of $276m.

This loss is reflective of the decline in profits in general for the travel industry due to Covid-19. Border restrictions have severely restricted international travel, evidenced by Air New Zealand’s reported 74 per cent decrease in passenger revenue from April-June 2020 compared to the same period in 2019. In addition to this, Air New Zealand incurred $338m aircraft impairment expenses due to the grounding of fleet for the foreseeable future.

KiwiRail (ranked 61st in the Top 200 Index) is 2020’s second biggest loss maker, making a loss of $325m. Note that the financial statements obtained for Kiwirail in the current publication year are for the year ended 30 June 2019, as 30 June 2020 financials had not been made available in time for the publication of the Index.

Pacific Aluminium (49th) and Goodman Fielder (42nd) respectively hold the third and fourth biggest losses in 2020. Pacific Aluminium is a new entrant to the biggest losses index, reporting a loss of $313m (compared to a $236m profit in 2019). Goodman Fielder, ranked 11th on the biggest losses index in 2019, has reported a loss of $242m (compared to a $15m loss in 2019).

The fifth biggest lost was reported by Kiwi Property (170th). Kiwi Property has reported a loss of $187m in 2020, in comparison to its $138m profit in 2019.

Fonterra (1st) no longer holds a spot on the losses index. Last year it was ranked second with a loss of $122m, but in 2020 it reported $803m – the top profit in the Top 200 Index, with its profit after tax increasing by $931m.

Most improved profit

Kordia (ranked 183rd in the Top 200 Index) is a newcomer in 2020 after dropping off the Top 200 Index in 2019. It recorded the most improved profit out of all the entities on the Top 200 index, with a 6558.4 per cent increase from a $0.1m loss in 2019 to $9.6m profit in 2020.

This jump in profit can be attributed to a 9.6 per cent increase in revenue year-on-year from $203m in 2019 to $223m in 2020, specifically in revenue from its Australian business unit, which had declined in 2019 due to the Australian Government’s Chinese vendor ban on 5G networks at the time, but has recovered in the current year.

Meat processor Silver Fern Farms (ranked 18th) has the second most improved profit, recording a profit of $70.7m in 2020 compared to a $5.8m profit in 2019. This is an increase of 1,114.7 per cent.

City Care (ranked 140th) holds third place for most improved profit, with an increase of 875.7 per cent. In the current year, City Care recorded a profit of $5.6m, compared to 2019 where a loss of $0.7m was recorded.

Silver Fern Farms (ranked 18th), Powerco (89th), and Spotless (109th), are the only three companies to be included in the most improved profit table in both 2019 and 2020.

In 2019, Silver Fern Farms held 13th place with a 201.8 per cent increase in profit, Powerco held 16th place with a 194.2 per cent increase in profit, and Spotless held second place with a 734.2 per cent increase in profit. This year, Silver Fern farms holds second place with a 1114.7 per cent increase in profit, Powerco holds 11th place with a 242.9 per cent increase in profit, and Spotless holds 18th place, with a 132.0 per cent increase in profit.

Most Improved Performance

Oil and gas company OMV (ranked 57th in the Top 200 Index) has reported the most improved revenue in 2020. Its revenue increased to $721m in the current year compared to $202m in 2019. This 256.8 per cent increase in revenue can be attributed to increases in both domestic and offshore sales, reporting significant increases in its sales of crude oil and gas.

Newcomer to the Index Microsoft (95th) is ranked second for most improved performance, with a 153 per cent increase in revenue on last year’s result from $183m to $462m.

Another newcomer, Simsmetal Industries (181th), has seen a similar increase in revenue, reporting an increase of 123.2 per cent from $101m in 2019 to $226m in 2020.

Horizon Energy, Scott Technology, and Seeka are also new entrants to the Deloitte Top 200 Index in 2020.

A2 Milk and Xero are the only companies to be included on this index for four years in a row, while Scentre has been included for two years in a row, following its entrance into the Top 200 Index in 2019.

This year’s best growth strategy finalist, Xero, held 11th place in 2019 (35.9 per cent), and now holds the eight spot in 2020 with a revenue growth of 29.9 per cent. Xero has experienced increased revenue over the last four years mainly due to the increase in international subscribers exceeding those from New Zealand.

CDC Pharma is the only company to be included in both the most improved profit and most improved revenue index in 2020.

Return on assets

Return on Assets (ROA) provides an indication of how efficiently a company manages its assets in order to generate earnings. It is calculated by measuring profit against total assets reported.

As a measure, this number tends to be heavily influenced by the requirements of the industry in which the business operates.

Agriculture and manufacturing businesses for example, requiring significant amounts of property, plant and equipment, will typically have a much lower return on assets percentage than a software company.

Lotto NZ (29th) now holds the top spot for return on assets for the second year in a row after entering the Top 200 Index in 2019. It has improved on its previous ROA of 201.2 per cent in 2019 to have an ROA of 214.0 per cent in 2020. The high ROA is driven by a 25.5 per cent increase in profit after tax from $261m in 2019 to $333m in 2020, with total assets of $190m in 2020.

Holding the second spot for ROA is TAB (120th), despite a decrease in its ROA to 102.6 per cent from 109.4 per cent. This is driven by an increase in total assets from $130m in 2019 to $136m in 2020, and a decrease in profit after tax from $146m in 2019 to $137m in 2020.

The third place is held by A2 Milk (22nd), with a ROA of 31.6 per cent (compared to 34.2 per cent in 2019), moving up from placing sixth for return on assets in 2019.

Zespri (12th) placed fourth in terms of ROA, rising from seventh place in 2019. Zespri’s ROA has decreased from 29.9 per cent in 2019 to 23.0 per cent in 2020. This is due to net profit increasing from $180m in 2019 to $201m in 2020 with total assets also increasing from $677m to $1,070m.

The general trend of decreasing return on assets falls in line with the 36.9 per cent decrease in average profits, with second to 20th places for 2020 decreasing year-on-year against second to 20th places in 2019. Only the ROA for first place, held by Lotto NZ, improved year-on-year, resulting in a wider gap between first place and the remaining top return on assets placeholders.

Return on equity

Return on Equity measures how effectively a company can generate income relative to the amount of money shareholders have invested in the firm.

It’s a useful tool for investors, particularly when comparing firms within the same industry and is calculated by measuring the revenue earned against the average equity held over the past two years – to prevent changes in shareholder contributions skewing the results.

Retailer Bunnings (ranked 27th in the Top 200 Index) has taken the top spot for return on equity, moving from 13th place in 2019, with a return on equity percentage of 2639.9 per cent.

Lotto NZ (29th) has replaced mining company Oceana Gold for second place with a return on equity of 767.3 per cent.

TAB (120th), a new entrant to the top return on equity index, has placed third for return on equity of 349.1 per cent.

Oceana Gold (86th) has dropped to fourth place, with a return on equity of 210.2 per cent, a decrease from last year’s return on equity of 786.5 per cent.

With the entrance of TAB, Nestle (101st) now holds the fifth place spot with a return on equity of 204.0 per cent. Last year it was ranked fourth with a return on equity of 566.6 per cent.

The newcomers

As usual, there are a number of companies making a debut on the Deloitte Top 200 Index, with 13 companies added in 2020.

Microsoft entered the index at the highest rank (95th) with revenue of $462m.

Horizon Energy entered the index at the second highest rank (163th) with revenue of $251m. Fleet NZ came in at 171st, with revenue of $242m. Seeka (175th) came in as the fourth highest newcomer, with revenue of $237m.

The rest of the new entries were Simsmetal Industries (181st), Scott Technology (182nd), Kordia (183rd), McConnell Dowell (187th), Baxter Healthcare (190th), Mitre 10 (193rd), Progress Capital (194th), Sistema (196th), and Airwork (200th).

Missed the cut

The 200th place in the 2020 Deloitte Top 200 is Airwork, which recorded $200m in revenue. This compares to Juken, which was last year’s 200th-ranked company on the Index, with $206m in revenue in 2019.

Missing the cut – by just $1m – was Aurecon (201st) and Huawei (202nd), recording revenue of $199m.

Kia Motors (203rd), Pushpay (204th), Skyline Enterprises (205th) and Comvita (206th) were close to breaking into the Top 200 Index in the current year, all achieving revenue around the $196m – $198m mark. Of these companies, Kia Motors and Skyline Enterprises have fallen out of the Top 200 in 2020, previously holding 198th and 176th places respectively in 2019.

Other narrow misses include Oceania Healthcare (207th), Sumitomo Capital (208th), Rexel (209th), and Sealed Air (210th), all with revenue above the $191m mark.

Top 30 Financial Institutions Index

This year’s Top 30 Financial Institutions Index sees the return of Mercedes-Benz Financial Services, claiming 23rd place. There were no other new additions to the Index this year. Last year there were three new additions.

The Top 30 have once again grown their total asset bases, this year by $44,266m from $557,606m in 2019 to $601,873m in 2020. This is a 7.9 per cent increase compared to the 4.0 per cent increase from 2018 to 2019.

Once again, the top bank is ANZ, holding assets of $169,416m which has increased by 6.5 per cent from its 2019 total asset value of $159,012m. ANZ sits comfortably at the top spot with a $60,304m gap in total asset values between first place and second place (BNZ). Furthermore, ANZ also outpaces all other banks in terms of profit and equity.

The second spot in the Index is BNZ for the second year in a row, with total assets of $109,112m. This is an increase of 9.1 per cent from total assets of $99,991m in the previous year.

Westpac and ASB are the next top financial institutions with $106,762m and $105,212m of total assets respectively. This year has seen them trade third and fourth places between themselves, with Westpac overtaking ASB in the current year, after reporting total assets of $96,656m and $98,467m in 2019 respectively.

All of the big four banks: ANZ, BNZ, Westpac and ASB have seen an increase in their total assets of 6.5 per cent, 9.1 per cent, 10.5 per cent and 6.9 per cent respectively.

Of the big four banks, ANZ and Westpac have the two highest return on assets ratios, both of 1.1, while BNZ and Westpac have the highest return on equity ratio of 13.3.

Kiwibank has retained its fifth-place spot with total assets of $25,510m. Kiwibank’s total assets have increased by 12.2 per cent from $22,734m in 2019.

Cumulative profits for the top 30 financial institutions have decreased by 7.5 per cent from $6,503m in 2019 to $6,014m in 2020.

Of the top four financial institutions, only Westpac has increased its profit year-on-year, increasing 1.1 per cent from $1,117m to $1,129m. ANZ reported a decrease in profit from $1,953m to $1,819m (-6.9 per cent), BNZ reported a decrease in profit from $1,029m to $1,022m (-0.7 per cent) and ASB has decreased profit from $1,274m to $958m (-24.8 per cent).

Cumulative equity has increased by 5.7 per cent from $47,263m in 2019 to $49,934m in 2020.

The top 10 financial institutions have remained the same 10 entities from 2019 to 2020.

HSBC has reclaimed eighth place after dropping to ninth in 2019. This is due to a 10.1 per cent increase in total assets. HSBC’s total assets have increased from $6,030m in 2019 to $6,642m in 2020.

MUFG Bank has claimed ninth place in 2020 (up from tenth in 2019), reporting an increase in total assets of 21.0 per cent from $5,383m in 2019 to $6,516m in 2020.

AMP life has increased total assets by 3.5 per cent to $6,315m from $6,100m in 2019 and is ranked tenth this year (down from eighth in 2019).

It is noted that certain financial institutions may have released unaudited earnings announcements that are not reflected in the indices or commentary above.

Infrastructure: New Transport Minister Michael Wood says let’s get transport moving

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Newly appointed Cabinet Minister Michael Wood has high ambition for his transport portfolio. Some of the top-line goals he says are priorities, are to get the city moving, improve freight connections, safety, and progress decarbonisation.

“A lot of this work was set up in the last term, I really see this term as about driving those things through in a practical way and getting them done through projects and programmes,” he says.

Wood says the additional components since the Government’s last term is the “build back” aspect — the fact that infrastructure investment will also be a critical element of the economic recovery and rebuild from Covid-19.

“We are looking at a $54 billion transport pipeline over the next ten years that we’re able to deliver and that is going to be really significant on the jobs front, on the skills development front, on the productivity front as well.

Auckland light rail, a personal pledge
The coalition government was unable to reach agreement on light rail last term. Cabinet suspended progress on the flagship project until after the election. Since then, Wood has taken over the portfolio from Phil Twyford, and for him, making progress on the project is personal.

One of Wood’s key promises when campaigning in the Mount Roskill by-election in 2016 was to fast-track a light rail system from Auckland’s Wynyard Quarter to his electorate in Mount Roskill.

The project will connect the two largest employment hubs in Auckland — the central city and the area north of the airport — along with the Government’s largest housing development in Mount Roskill and Māngere.

“As much as anything it is about connecting up the network,” says Wood. “It is not just people using that line, but from it they will be able to access the western line, the northern busway, the southern line, the airport, out to Botany — and you’re adding greater additional capacity to the whole public transport network in Auckland.”

He is now getting up to speed with the detail of the two options put forward during the competitive bid process by Waka Kotahi NZ Transport Agency and NZ Infra (a consortium that includes the NZ Super Fund and CDPQ Infra, a Quebec-based pension fund). “There are questions that come up — methodology, the route, financing, ownership structures — and we need to work very carefully through those,” he says.

But Wood says the project will go ahead on his watch. The next milestone for the project will be a report from the Ministry of Transport, which was tasked by the previous Cabinet to do further work and consider the best option for the project.

“We want to get the decision right at this point,” he says. “As Auckland continues to grow, if we don’t make these kinds of investments we are going to choke on our own growth.”

Open-minded but cautious
As the new Minister, Wood is coming up to speed with several issues in the portfolio, including congestion charging and his level of appetite for public-private partnerships to fund and build transport infrastructure.

On congestion charging, Wood says he will soon receive a report from the Ministry of Transport with analysis into the impacts of various congestion pricing scheme options, and their technical requirements. He says he wants to see what the analysis shows, describing his position as “open-minded, but tinged with a bit of caution as well.”
“We haven’t got any international comparators with a fully integrated road pricing system that some people are proposing,” he says. “I’d be a little bit cautious about leaping into that although I am open-minded to the fact that it could be a useful tool for demand management and managing congestion.”

He says there is a sequence in question before Auckland could go down a congestion charging track, which would ensure that are effective public transport alternatives in place before imposing charges on people for using private vehicles.

It raises an equity issue — Wood says that while congestion charging wouldn’t necessarily change the way he moves around the city, for those on low incomes it would.

“I would want to see some good analysis and thinking around it before I’d be prepared to take it further,” he says.

Wood says he is also open-minded about the use of public-private partnerships to fund transport projects, but wants to take care to make sure the arrangement is right for New Zealand’s interests.

“I have a responsibility to look after the Crown’s position and make sure that any arrangements we enter into are done responsibly, that the long-term value is right and that the risk allocation is right,” he says.

Construction staff
Wood says while there are calls to keep adding to the transport pipeline, it will be important to ensure New Zealand has the workforce to deliver. An underdeveloped workforce strategy has been a long-term problem for New Zealand, particularly in the infrastructure sector.

“In the long-term, we have a vision to build up a largely domestic workforce that is capable of doing that work and capable of sustaining it over a long period of time,” he says, pointing to the Government’s free trade training and apprenticeship scheme that was put in place is part of the Covid-response as one way this is being encouraged.
“A lot of work done in the previous term was done by a group of ministers to get the construction sector to work more collaboratively on skills and training along with procurement and all the other range of issues. It’s a work in progress there.”
Wood says that at this point there will still be a requirement for the workforce to be supplemented with offshore labour as well — particularly in specialist areas.

Eye to the future
Over this term, Wood says he expects to deliver on the manifesto that Labour was elected to implement.

“That will include rolling out those investments that are already in place, but not yet delivered. The big programme that’s in the Government Policy Statement on Land Transport (GPS), the shovel ready projects and New Zealand upgrade projects, light rail.”
He says the Government is very committed to carrying forward its balanced approach to transport — “there are a mix of transport priorities — yes, roading, but also public transport, rail, walking, cycling, coastal shipping as well,” he says.

“We want to get the right solution to the particular transport problems we face in different areas and be mode neutral — starting out with what are we trying to achieve and then considering what mode and what investment is going help to get us there.”
Wood says the Government is very conscious that if it doesn’t keep up the core investment in maintenance on the state highway network and regional roads they will degrade very quickly.

“There is a big spend that is going on there as well — not necessarily building new roads, but making sure that they are maintained well and that there are constant improvements in terms of the safety profile of them as well,” he says.

He says another big aspect of his role will include the agenda around decarbonisation.
“Next year we get the first carbon budget from the climate commission — and transport is about 20 per cent of it.”

One thing that Wood makes clear: the next three years won’t be about reformulating plans and new strategies — it will be about delivery.
“After a lot of planning, the fruits of that are going to start to be seen,” he says.

— Additional reporting Fran O’Sullivan

Infrastructure: Bridging the troubled water gap (NZ Herald)

https://bit.ly/3nzQfrs

Water is New Zealand’s most valuable asset and the biggest infrastructure challenge of the next decade.

That is the view of Fletcher Construction chief executive Peter Reidy, who says New Zealand’s water infrastructure is well overdue for investment as pipes reach the end of their useful lives.

Reidy says that more than a third of wastewater treatment plants will require re-consenting within the next decade, and almost a quarter are operating on expired consents. Conservative estimates are that the cost of upgrades and renewals will be measured in billions of dollars.

“The public’s environmental expectations are also increasing and the consequences of climate change, including more frequent and more intense droughts, require urgent attention,” he says.

Over the past three years, central and local government have been considering how to address the challenges facing delivery of three waters services (drinking water, wastewater, stormwater) to communities. The review followed the 2016 Havelock North campylobacter contamination crisis that exposed systemic issues in the regulation and provision of three waters.

The result has been the establishment of Taumata Arowai as a Crown water regulatory body to administer and enforce a drinking water regulatory framework, with additional oversight on improving the environmental performance of wastewater and stormwater networks.

In July this year, as part of the Covid-19 stimulus, the Government announced $761 million in funding to maintain and improve three waters infrastructure and to support the reform of local government water services delivery arrangements.

At the funding announcement, Local Government Minister Nanaia Mahuta said there are “massive looming costs across the three waters networks” and the current delivery arrangement, particularly for smaller rural and provincial councils, are not well-placed to meet them.

Although councils currently own and manage most water services, the investment from Government was made contingent on local councils opting in to the government’s wider reform programme.

Fletcher Construction supports the Government’s plans to reform the way we manage water.

“At the end of the day it is all about customers — improving environmental standards, value for money and productivity for customers,” says Reidy. “Having water utilities at scale will also allow for greater investment in digital solutions to water.”

Fletcher Construction has brought together two of its businesses — Fletcher Construction Infrastructure and Brian Perry Civil — to support the establishment of capital construction plus operations and maintenance for water assets to help local government meet their challenges.

In September, Fletcher Construction along with Fulton Hogan signed a $2.4 billion contract with Auckland Council-owned Watercare Services for the delivery of water and wastewater infrastructure for Auckland over the next 10 years.

Watercare said the long-term, collaborative partnership is a first for New Zealand. The planned programme of work — rather than discrete projects — is expected to help drive greater cost-efficiency and innovation. A key goal is Watercare’s aim to reduce carbon in infrastructure by 40 per cent by 2024, to reduce the cost of its infrastructure programme by 20 per cent by 2024 and to “improve the health, safety and wellbeing of all people involved in delivering our infrastructure by 20 per cent year-on-year.”

Reidy says the 10-year partnership with Watercare was secured under a new enterprise model which has audacious cost and sustainability goals. “This is a transformational model of partnership built around carbon reduction, safety improvements and cost savings that challenged our team to collaborate across their specialty areas,” he says. “Watercare has changed the way it partners and that has stimulated Fletcher Construction to respond in a way that puts safety, sustainability and innovation at the core of our model.”

Reidy says it is that kind of model that could work across the country.

“With Wellington Water we are also offering more than just a straight subcontractor model. And that’s because real progress can be made when deliverers are embedded within planning and project teams.”

Reidy says the Government has started this conversation, but we all need to collaborate together to find the solutions. “That’s critical for our cities, our waterways and our people,” he says.

Infrastructure: ICBC – strengthening our resilience (NZ Herald)

https://bit.ly/2ULQCD3

Infrastructure is one of Industrial and Commercial Bank of China (ICBC) Group’s strategic sectors.

Karen Hou, ICBC NZ’s chief executive, says this focus extends to New Zealand, and has been an area that she and her team care deeply about.

“When you consider infrastructure, it is about delivering long-term projects,” she says. “It is not about short-term profit or short-term achievements, but instead requires a long-term vision.”

She notes that infrastructure not only helps to build the economy but also helps with the country’s resilience.

Hou says while Covid-19 demonstrated that New Zealand can be very resilient, other recent events — including the International Convention Centre fire and the damaged Auckland Harbour Bridge — show that resilience in infrastructure is an area that needs bolstering.

“We are operating here in New Zealand because we are committed to providing the long-term support required to strengthen the resilience of the country’s infrastructure,” says Hou.

“We are interested in all aspects of infrastructure — bridges, railways, motorways, water, power, schools, hospitals, ports, airports, aged care — these are all important areas of infrastructure that will provide fundamental support to the country and help the economy.”

Boosted capacity for funding
In May this year, the Reserve Bank announced it had granted ICBC a licence to operate directly as a branch in New Zealand.

While ICBC NZ will continue to operate in New Zealand as a subsidiary, Hou says the branch licence allows the bank to make a stronger contribution to New Zealand by bringing the consolidated Group balance sheet into play to support local projects. “With this licence, we have a greater capacity for lending in New Zealand — especially into infrastructure and green projects,” she says.

ICBC NZ has been active in New Zealand for over seven years now, and has already been involved in several of New Zealand’s major infrastructure projects.

One of the first projects ICBC NZ became involved in was Transmission Gully. ICBC NZ, along with ICBC Sydney Branch, provided around NZ$100m in the banking syndication to fund the public-private partnership project.

The 27km four-lane project will provide safer, quicker, less congested and more reliable route, bypassing many existing bottle-necks and the more hazardous stretches of the existing SH1, and connecting Wellington to the growing economic centres of Kapiti and the Manawatu and subsequently the wider North Island.

ICBC NZ, along with ICBC Asia, has also recently provided funding to assist Napier Port with their capital investment programme, which includes the development of the new 6 Wharf. “We have been able to leverage the wider ICBC Group’s global resources for this project which provides more funding capacity to our client,” says Hou.

In the 10 years prior to Covid-19, Napier Port has experienced a 50 per cent increase in containers, 94 per cent increase in cruise ships and 64 per cent more bulk cargo.
The new 350-metre-long wharf, for which construction commenced earlier this year, will be a crucial piece of infrastructure for Hawke’s Bay. It will future-proof the port, allowing it to handle larger ships and improve operational performance.

International experience
ICBC NZ has been a long-time supporter of the Infrastructure NZ symposium and is again a sponsor for today’s conference. Now in its fourth year of sponsorship, ICBC says this long-term support reflects its commitment to New Zealand’s infrastructure industry as a whole.

ICBC NZ helped co-ordinate Infrastructure NZ’s delegation to Singapore, Hong Kong, Beijing and Shanghai last year, which included sessions on the national, regional and city governance, their economy and infrastructure funding and financing, masterplan of these mega cities and transport system, and how these countries and areas look at prioritising their investment planning.

Hou says some of the experiences from international practice for New Zealand include the public-private partnership models, alternative construction methods and new funding mechanisms.

Modular construction is an area that quickly gained momentum in international practice and is something New Zealand should consider. In modular construction, the components of a project is done away from the construction site, and then delivered for assembly.

This can include buildings, ships and other key pieces of infrastructure. The use of this method can dramatically increase the speed and lower the cost of large-scale infrastructure projects.

Another example is infrastructure leasing, which is a funding mechanism ICBC uses with operators across Europe, Asia and China, and Hou says is something that could be considered for the delivery of some New Zealand infrastructure assets. This type of funding is often used for aircraft or maritime vessels. “There is a leasing financial team within ICBC Group in China that specifically works on this funding model,” says Hou.

Outlook for the Future
Hou says the Covid-19 pandemic has seen New Zealand raise its profile and position in the world due to its adept management.

“New Zealand has proven to be one of the most successful countries to manage the pandemic, which sets the country up well for future investment — because people want to invest in countries that can demonstrate they are resilient,” she says.

Hou hopes that the opportunity the recovery presents will help New Zealand with its economy, and ultimately ensure its infrastructure is as resilient as it can be.

Sustainability is a necessity now

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The Covid-19 crisis has not sated the appetite for investing 

When the Covid-19 pandemic struck, some suggested that investing sustainably is something best-suited to a bull market — a “luxury good” or “nice-to-have” — but among the first areas to be cut back when times are tough and the economy is receding.

Internationally, it seems that investors have not just stuck with sustainable investing, but have embraced it. Instead of a luxury good, sustainability is seen as a necessity and an idea whose time has come.

The new reality the world is facing has forced investors to consider risk differently, and has highlighted the interconnectedness between social, environmental and economic challenges.

JP Morgan ESG & Sustainability heads Jean-Xavier Hecker and Hugo Dubourg say: “Over the long run, Covid-19 could prove to be a major turning point for ESG investing, or strategies that consider a company’s environmental, social and governance performance alongside traditional financial metrics.”

Indeed, a survey run by JP Morgan asked 50 global institutions (representing US$12.9 trillion in assets under management) how they expect Covid-19 to impact the future of ESG investing. It showed some 71 per cent think it is “rather likely”, “likely”, or “very likely” that a low probability-high impact risk like Covid-19 would increase awareness and actions globally to tackle high impact-high probability risks such as those related to climate change and biodiversity losses.

More immediately, the pandemic has seen investors turn to sustainable and responsible investments as a form of safe haven. This is because companies with strong records on employee relations, environmental sustainability and corporate governance tend to do well over the long-term.

Closer to home, the Aotearoa Circle’s Roadmap for Action identified some of the domestic social inequalities that have been highlighted by the Covid-19 crisis, including:

·       Those on lower wages, and females, have been more impacted by job losses and have less certainty about when their jobs may return.

·       Those on lower wages have less capacity to absorb financial shocks, meaning their wellbeing has been more impacted by Covid-19.

·       Those without digital access or capability have been further excluded from accessing essential health and other services.

·       Those with essential jobs are the people we rely upon during a pandemic. Yet they receive little compensation above the minimum wage. This has led to the stark realisation that we need to value these people differently and need to re-think our ideas of value.

The Aotearoa Circle says the rapid behavioural change in response to the pandemic has shown how innovative and adaptive we can be.

It suggests that governments stepping in to become some of the largest consumers via various stimulus programs presents a crucial opportunity to serve two purposes: economic recovery and a climate change crisis recovery.

The Roadmap for Action says: “Our recovery needs to look to reduce the social and environmental imbalances that disrupt our society, and make our economy more resilient for the next generation.

“If the huge stimulus does not simultaneously contribute towards a more resilient, sustainable economy, or worse, sets us back in our response to those issues, there are real risks we leave ourselves further exposed, and we are putting ourselves at a higher risk of funding shortages to achieve such a transformation in future.”

Co-chair of the Sustainable Finance Forum and New Zealand Super Fund CEO Matt Whineray says while the pandemic and the consequential economic destruction looms large, the existential crisis that is climate change is not going away — and will continue to worsen.

“Responding to the pandemic in a way which exacerbates the climate crisis, would be a global policy failure,” he says.

While New Zealand may have lagged behind some of the large international markets, investment in areas that reduce global carbon emissions and address essential social services is rapidly growing.

For example, New Zealand’s sustainable bond issuance is becoming a relatively significant asset class of its own. ANZ/ Bloomberg’s analysis of sustainable bonds in New Zealand by year shows a dramatic rise in issuance from $106m in 2017 to $2.125b in 2020. Over the past three years, some $2.7b in wellbeing bonds have been issued by government housing provider Kāinga Ora to fund sustainable and affordable social housing.

There is also a growing expectation from New Zealanders that their KiwiSaver providers focus on responsible and ethical investment opportunities that deliver positive outcomes aligned with their values.

Further compounding this demand is the rapid growth in millennial investors. This will become even more significant as the largest ever intergenerational transfer of wealth occurs in the near future, putting some US$30 trillion under the control of millennials in the US alone.

A 2019 Morgan Stanley report says 95 per cent of millennials are interested in sustainable investing (compared to 85 per cent of the general population). The report also showed that 85 per cent of millennials believe it is possible for their investment decisions to influence the amount of climate change caused by human activities and 89 per cent say their investment decisions can create economic growth that lifts people out of poverty.

As the government and large corporates in New Zealand ramp up the delivery on their productivity, social and environmental aspirations, the call from investors for increased sustainable investment opportunities will be answered.

Investors will likely embrace the opportunity to provide some of the significant capital flow that will be needed to help ensure New Zealand’s economic recovery is long-lasting and sustainable.