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)

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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)

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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.

New Zealand Green Investment Finance has made three investments, and is eager for more, writes Tim McCready

New Zealand Green Investment Finance has made three investments, and is eager for more, writes Tim McCready

New Zealand Green Investment Finance (NZGIF) was established by the Government to help New Zealand achieve a transition to a lower emissions economy, as part of a global movement to finance ways to mitigate the effects of climate change.

The green investment bank has an initial capital fund of $100 million. It is tasked with stimulating a market in which private capital flows to investment in activity that reduces our domestic emissions.

NZGIF’s chief executive, Craig Weise, says one of the ways to do that is to lead the market by demonstrating not just the greenhouse gas benefits of its investment, but commercial and other benefits as well.

“I think that’s one of the big aspects of our mission that is really important, which at its core is about acceleration of investment in lower emissions activities,” he says.

Weise, who comes from a long career in private capital markets, says prior to taking the role at NZGIF, he knew how important it was to deploy capital in order to get the right environmental outcomes, and was waiting for the moment that would be able to occur.

“That’s when you can start to make a difference in a big way. I’ve always been excited about that opportunity,” he says.

Around the world, green investment banks have been established to catalyse private investment in domestic low emissions and other environmental projects.

“They are generally initially capitalised by governments but operate independently in the market to mobilise private investment.

Weise says internationally, green investment banks tend to focus on very different things to NZGIF because most economies are thinking about decarbonising their energy supply.

“For us, we looked at what they were doing, how they were structured, and what they were achieving — and then thinking about it in the New Zealand context, where we already have a lot of large-scale renewable energy, and it’s very well capitalised in terms of the gentailers.”

Broad investment mandate

So far, NZGIF has made three investments: Thinxtra, an Internet of Things network and service provider; Carbn Group, supporting the uptake of low emissions vehicles in corporate and government-owned fleets; and CentrePort, a transport and property infrastructure firm.

Each of the deals NZGIF has done to date are quite different, and Weise says that — to a certain extent — this has been a deliberate move.

The deals that have been done help to illustrate to the market the breadth of what NZGIF can do, as well as signal the areas it sees as being economic and investible.

“It is not just about us deploying our own capital — it is also about showing the market that these things are there,” says Weise. “It has been really important for us to go out and build institutional credibility in the market.

“Do the deals, let people understand us.”

A flexible approach

NZGIF can invest through a range of capital structures, from debt to equity, with mechanisms to mitigate risk for its partners.

It will be able to create solutions with the market that are hard for other institutions to do because of how it can use a balance sheet.

Its role will be different depending on what the need is.  In some cases, it will need to aggregate sub-scale investments for bigger investors, because they may not have the incentive to write small cheques.

In other cases, NZGIF will get opportunities outside of corporate balance sheets that don’t make sense on their own, but make sense when you start to pool them.

It will also be able to de-risk some projects — for example where it is the first time something is being done in New Zealand. While a bank might get stuck on a particular risk, NZGIF can take the risk on more easily, unlocking a deal that might have huge carbon benefits for the country.

“One of the things about the market in New Zealand is that because we’re a small market from a capital markets perspective, some of those things are just a function of being a small market,” he says.

“It’s not only because there is an emerging understanding around low carbon and green investment — it’s because we’re a small market.”

Weise says this flexibility is one of NZGIF’s key points of difference as an institution. “We are not called a fund for a reason — because funds behave in very specific ways,” he says.

“That is very powerful for us in achieving our mission, but it’s also a bit confusing, because we have a lot more flexibility in terms of how we use the balance sheet, and we are operating over time horizons that are much, much longer than most funds would be thinking about.”

That time horizon is not necessarily around the duration of the finance, but defines how NZGIF is thinking: helping New Zealand get to net zero emissions by 2050.

The investments made to date further demonstrate NZGIF’s flexibility.  The CentrePort deal is structured as a straightforward senior credit facility, where it is able to draw down money and pay NZGIF interest. The facility has a term, along with a set of rules around how the capital can be used and for what purpose.

The Carbn Group deal is an example of a hybrid investment. NZGIF has put both debt and equity into the company.

Weise says this is because the group is doing two different activities: one side of the business provides advisory services for government and corporates looking to optimise their vehicle fleets, the other side specialises in financing low emissions vehicles, with expertise in the economics of electric vehicles.

“With Carbn Group we saw a gap in the market that needed to be filled to help us to transition holistically,” says Weise.

“And we liked it in particular because a lot of vehicles come into the country via fleets, and then into domestic use later on. It’s a way to increase that uptake a little bit faster — coming back to our acceleration mission.”

A healthy pipeline

Weise says it is very encouraging that there continues to be a very healthy pipeline of opportunity: “You’ll see us continue to make announcements on a fairly regular basis.”

But he says beyond doing deals, NZGIF is very focused on bringing other capital providers along with it. It aims to work with a broad range of partners, including financial markets and investors, banks, private companies, local government and global green banking networks.

“NZGIF can’t do it alone, because the delta is much, much bigger than its own balance sheet,” says Weise.

“There are so many ways we can participate with the market.

“It’s quite exciting as a practitioner, because it is on you to have that sort of flexibility,” he says.

“We would encourage other institutions who see — or want — opportunity, to come and talk to us.”

Investments made to date

CentrePort: CentrePort is a transport and property infrastructure firm, built around its core port business on Wellington Harbour. It provides supply chain solutions and expertise including the CentreRail Service with KiwiRail, and a network of inland cargo hubs. CentrePort facilitates international and coastal shipping, the inter-island Cook Strait ferry services, and land and aviation fuel supplies.

CentrePort was NZGIF’s first investment, announced in June 2020. The green credit facility of $15m will be used to provide the finance needed to accelerate the deployment of low carbon projects, with the capital ensuring the projects remain a priority and are developed alongside the wider regeneration of the port. NZGIF’s lending will be exclusively used to fund low-carbon projects which will reduce CentrePort’s overall carbon footprint, such as the introduction of electric vehicles, on-site renewable energy generation and energy efficient upgrades. As well as assisting the port to achieve its climate goals, the investment in electrification, renewables and efficiency will provide an example for other firms in the port sector and beyond.

Carbn Group: Last month, NZGIF made a $5.8m investment in Carbn Group – the parent company of two subsidiaries that have been formed to support the uptake of low emissions vehicles in corporate and government-owned fleets.  The Carbn Group addresses knowledge and capability gaps in the market for specialist low emissions vehicle transition, fleet optimisation and financing. Its goal is to accelerate transport emission reductions through the effective and efficient adoption of low emission vehicles.

In New Zealand, the transport sector accounts for around 19 per cent of GHG emissions.  Transport is New Zealand’s fastest growing emissions sector and emissions have risen by more than 70 per cent since 1990.  However, momentum is building for low emissions transport technology adoption.

Carbn’s services reduce the overall cost of a fleet and ensure continuous reduction of fleet carbon emissions by reviewing a company’s vehicle types and usage patterns to assist them to transition to a low emissions fleet. This aligns with NZGIF’s purpose and New Zealand’s wider aspiration to reduce vehicle emissions.

Thinxtra: In August, NZGIF announced a strategic equity investment in Thinxtra, an Internet of Things (IoT) network and service provider operating an established network across New Zealand, Australia and Hong Kong. Its investment formed part of the company’s latest funding round alongside other investors.

Thinxtra’s technology supports firms to improve efficiency and asset utilisation, with clear carbon benefits. It has built, owns and supports the 0G Network, powered by Sigfox technology, which is low-cost, resilient and capable of supporting high volumes of connected devices, using very little energy to run. These devices allow companies to, for example, use less power, travel less and save carbon.

One example NZGIF gives of how the technology could be applied is the NZ predator free programme. Pest traps could be remotely monitored, meaning traditional scheduled checks in remote areas can be made more efficient by a smart trap triggering a check only when a predator has been captured. The same OG Network can be used to provide better insights into assets in the area, geolocation and safety of people (rangers and volunteers) and the overall health of the environment.

NZGIF says IoT provides a significant opportunity to reduce carbon emissions, and its investment in Thinxtra will help support a dynamic market leader to accelerate the deployment of its technology in New Zealand and enable firms to reduce their emissions as well as save money.

Electrifying the economy

Transpower’s Alison Andrew tells Tim McCready the benefits of transforming New Zealand to a low carbon economy are significant

Transpower CEO Alison Andrew points to a future where technology will continue to play an ever more significant role in New Zealand’s transformation.

“Our electrified future means electric vehicles — whether that’s our own personal cars, corporate fleets or ride share,” says Andrew. “Many of us will have solar panels and batteries in our homes, to meet some of our own demand, and the ability to trade via the interconnected grid. We’ll have energy efficient, smart homes using intelligent energy management systems that optimise the use of devices, electric vehicle charging, battery use and grid supply, all without us having to worry about it.

Andrew says that will also play over into the work environments which will be similarly efficient and smart. “It’s an exciting and empowering energy future.”

The Herald asked Andrew: Has 2020 halted sustainability progress, or has it brought it front of mind for business?

Despite the disruption brought by 2020, I believe New Zealand businesses remains as committed to progressing sustainability as before. Stakeholders and investors are demanding that we all commit to action and make greater progress toward delivering on sustainable outcomes. We have a responsibility to our customers, communities and employees that we consider the social and environmental impacts of all that we do — and take steps to ensure positive outcomes.

Economically, it already makes sense. The price of wind generation is one quarter of what it was 10 years ago, down from $140/MWh in 2010 to $35/MWh now. The price of solar generation has dropped by more than 90 per cent in the last 10 years from $400/MWh to $30/MWh today in many parts of the world. Depending on your retailer, charging an electric vehicle off peak is already the equivalent of paying 40c per litre for your fuel.

As a nation, we have the opportunity to build sustainability into the very fabric of our economy as we adjust to life post-Covid. We cannot afford to bake yet more carbon into our economy through the decisions we make today but should instead see this as a turning point in our commitment to a net-zero carbon future.

What will be the agenda for business in 2021 in terms of sustainability, including new priorities in this regard?

Covid-19 has reminded us sharply that the welfare of our people is the most critical element of our success. Having highly engaged, skilled and capable people is central to all that we do and for Transpower and has enabled us to continue delivering our service despite the disruptions. We recognise that it is essential we make the most of the strengths inherent in having a diverse and inclusive workforce and culture. We are committed to the ongoing development of our people and our organisation.

To achieve the county’s net-zero carbon emissions, we need to electrify our economy. It starts by shifting the transport sector off oil and on to electric vehicles, trucks and buses. We also need to shift heat used in industry processes or for heating our large commercial and public buildings, from coal and gas, and on to electricity. Renewable electricity will power this transformation and will be the main part of the energy puzzle although biomass, direct geothermal heat, hydrogen, biogas and biofuels also have a role to play. At Transpower we have a key role to enable this energy transformation.

What role does Transpower have in helping New Zealand realise its ambition to be a low carbon economy?

As owner and operator of New Zealand’s national transmission assets, and operator of the national electricity market system, Transpower is a critical enabler of this change. We take a whole-of-industry view of the sector and a long-term view of what needs to change across our asset base and within the market system, to ensure New Zealand can meet its ambitions while continuing to power communities securely, safely and reliably.

Of course, transforming an economy needs a very good plan and Transpower has a significant role to play in supporting this to happen. We need a roadmap for how we can develop our energy resources and when; what technology and infrastructure is required; what policy and regulatory settings are needed. This is the work we have outlined in our paper Whakamana i Te Mauri Hiko — Empowering our energy future. The benefits of this transformation are significant and an opportunity to:

  1. Create thousands of new jobs.
  2. Meet our emissions reduction targets.
  3. Reduce average household energy bills by around 25 per cent by 2035.
  4. Improve our air quality with health benefits.
  5. Reduce our reliance on imported fuels thereby improving security of supply and our trade balance.
  6. And finally, to carve out a competitive advantage — improving our international brand and attracting international investors seeking green places to do business.

What challenges are Transpower facing (internal or external) over the coming year in making this happen and what approaches are needed to overcome them?

We have identified nine key areas of focus that will require collaboration across industry if we wish to achieve a net-zero carbon future. These include policy changes to remove barriers to low-carbon infrastructure and incentivise electrification and renewables, including RMA reform.

An immediate focus for Transpower is to streamline our connections process so new generation can be connected into the grid more effectively.

We are also focused on improved grid planning so we can be proactive in making this transition happen. We need to do this alongside industry and drawing from the collective knowledge that exists across the sector. The benefit for everyone is that we can all plan for the future, more effectively.

A  more challenging nut to crack is ensuring we have access to the skilled workforce needed to deliver on this future. We need improved vocational training, greater workforce diversity and a stronger sector brand that attracts young people motivated by our goal of decarbonisation.

Sustainable Finance: Flying into the future

Despite the pandemic creating significant budgetary constraints for Christchurch Airport, it has strengthened the airport’s sustainability ambitions and caused it to reprioritise its work programmes so as not to compromise its sustainability goals.

Tim McCready speaks with Christchurch Airport chief executive Malcolm Johns about the role infrastructure will play in moving New Zealand toward a lower carbon future and the opportunities it could bring for the airport.

Herald: What are the big challenges we need to overcome as we move toward a low carbon future?

The embedded nature of emissions in our daily lives shows just how hard the task ahead is if we are to stay within the 1.5 degree target set in Paris. For example, during Level 4 lockdown here in New Zealand, we effectively suspended 40 per cent of the national economy (including 90 per cent of aviation) and New Zealand’s emissions fell just 8 per cent! This is largely because the economic ecosystem we have built up over generations is linear in nature and operates on a “take-make-waste” model. This has embedded emissions deeply into our everyday way of life, and in a way that makes it hard for the average person to individually have any real impact on overall emission reductions.

If we step back from this for a moment, the foundation of this conversation is energy. The linear system we have built has been scaled up over time through access to cheap energy. We are living today on yesterday’s energy and we can only do that because of how carbon and the earth’s process have given us a rich, dense, transportable and tradable energy commodity.

To use this energy, we have spent trillions of dollars on assets that predominantly only run on this ancient energy. To support the operation of these assets, we have built trillions of dollars more in infrastructure. Thus, today our way of life is built on a global economic system that deeply embeds our CO2 emissions dependency.

Cars are a good example.

Every day the world produces around 75,000 new cars and lite vehicles. More than 90 per cent of them have combustion engines and will last for several decades into the future, thus embedding new transport emissions into the system.

How can we move away from this reliance on “ancient energy”?

To change this system, we must undertake one of humanity’s largest ever re-tooling events. This will either be a massive re-tooling of the assets towards those that operate on today’s energy (renewable energy) or a massive re-tooling of the way we live. Our choice is either A: change the assets, B: change the people, or C: fail.

For most countries, A is the only real option left as changing the people is a slow process that can really only occur over time. But A requires a change plan and investment on a scale not seen in modern history. It will only happen if we achieve stakeholder equity in the transition. A grand carbon coalition between consumers and shareholders and Government. No one party will achieve such an energy transition on its own. This is incredibly disruptive stuff!

 What role will infrastructure play in a lower carbon future?

Modern, sustainable infrastructure will play a key role. Where old infrastructure creates inefficiencies or fails to support lower carbon options for its users, it will need to be left behind in favour of new infrastructure that is sustainable and can support lower carbon futures for its users.

Christchurch Airport has worked to achieve stakeholder equity in many of the changes forced upon it from the earthquakes almost a decade ago. High consequence events give you the opportunity to bring in a “new normal”. It’s your choice how much “new” and how much “normal’ is contained within this. From a sustainability perspective, we have driven our own asset transition plans to ensure our infrastructure, old and new, can support a lower carbon future for our customers and our business. This has required some upfront investment which our shareholders have supported. The result is we have driven almost 90 per cent of Scope 1 CO2 emissions out of our business!

How has Covid-19 changed your ability to execute on your sustainability programmes?

Covid-19 cannot be an excuse for non-execution of sustainability programmes. It is reasonable that it may slow the pace of things in the short term if survival is paramount, but this is why a carbon coalition of stakeholders is important — you can only keep going in times like this when you have stakeholder equity available to allow you to do so.

Christchurch Airport has not only preserved near term investment in its sustainability programmes, it has also chosen to accelerate its plans in areas such as seeking ‘Airport Carbon Accreditation Level 4’ through the Airports Council International.

This programme is focused on creating long-term pathways to net zero carbon, aligned with global science-based targets to keep temperatures within 1.5 degrees. This would be a world-first in terms of Airport standards, and it is largely because Covid gave us the time and resources to look at committing to this programme sooner rather than later, that we pushed ahead with it. The earthquakes taught us that you make the ‘new’ in a new normal.

What opportunities could the drive toward a sustainable future mean for Christchurch Airport?

Airports are a portfolio business, largely serving planes, passengers and property, each with their own areas of opportunity.

We have proactively invested in infrastructure to eliminate the need for non-renewable energy power units to support aircraft on the ground, allowing them direct access to the electricity grid.

We have proactively invested in smart energy systems in our terminal, water efficiency, landfill elimination processes and most importantly, eliminating Scope 1 CO2 emissions from our terminal operation. We are now offering prospective tenants a menu of designed-in sustainability options for new buildings on our campus.

We have committed ourselves to building New Zealand’s greenest airport in Central Otago, to allow airlines to utilise their most carbon efficient aircraft in the future. We would love to see the country take on the challenge of building a multi-region low carbon, integrated transport network around this new site, that will serve Kiwis and their visitors sustainably for generations to come.

The recent announcement from Airbus that it is exploring hydrogen aircraft caught our eye. Christchurch Airport sits on top of one of New Zealand’s largest natural aquifers and has access to acres of land for solar power arrays.

Mood of the boardroom: How business leaders view Jacinda Ardern (NZ Herald)

Prime Minister Jacinda Ardern is admired by chief executives for her leadership during a challenging term in government, writes Tim McCready

Jacinda Ardern’s leadership has been tested over the past three years: the Christchurch terror attack, Whakaari/White Island disaster and pandemic are front of mind for respondents to the Herald’s 2020 Mood of the Boardroom Election survey.

They rate her leadership at 3.88/5 on a scale where 1= not impressive and 5=very impressive.

A property CEO says what Ardern has coped with in her three years at the helm is nothing short of unbelievable: “It’s hard to think of anyone who could have handled these challenges with the same deft touch as she has demonstrated.”

“Would I rank her as highly without those extraordinary events? Possibly not — but that’s hypothetical and irrelevant. Does she have some huge challenges in front of her as far as the ‘new normal’ is concerned? Goodness yes. Does that change how much credit she must be accorded for her performance to date? Not in my view.”

“It is hard to imagine a more difficult term for a first-term Government that has been out of power for three terms,” says Deloitte CEO Thomas Pippos. “The Prime Minister’s leadership in some of the key challenges the country has faced has been without a doubt very positive.”

CEOs rate Ardern’s integrity (3.57/5) and courage (3.67/5) among her top capabilities, along with her ability to adeptly communicate and demonstrate empathy. They say these are attributes that can be leveraged internationally to help New Zealand in its recovery following Covid-19.

“She has led the country through some of our most challenging moments in recent history, and her empathetic style has clearly resonated both locally and globally,” says Spark CEO Jolie Hodson.

The PM’s ability to form a coalition is also rated highly by CEOs among Ardern’s capabilities (3.51/5), having successfully negotiated her way into power following the 2017 election. Alongside this is her rating for political management (3.33/5) — demonstrated by her ability to lead a stable Government over three years — which many previously considered unachievable with Winston Peters’ involvement.

But executives say Ardern has been let down by her MPs and Labour’s inability to deliver on 2017 election promises including KiwiBuild and Auckland’s light rail.

“An outstanding leader on all fronts, sometimes let down by members of her team,” says the NZIBF’s Stephen Jacobi.

A healthcare boss says she is great at leadership in a crisis, but “lacks plans for a future pathway forward and has no credibility on implementation of any policy”.

This worries CEOs, as they say the “hard stuff” for New Zealand is only starting now and her ability in this is yet to be proven.

Ardern’s lowest scoring capabilities from CEOs are for her vision and strategy for New Zealand (2.56/5) and economic management (2.17/5).

Beca Group CEO Greg Lowe says when coming into power, the Prime Minister promised to govern for all New Zealanders. “While she has handled some situations very well, we are still lacking a long-term plan for New Zealand that we can all get behind and make progress on.”

Key Performance Indicators

The highest scoring KPI for the Prime Minister from CEOs is her management for the response to the Christchurch terrorist attack (4.50/5).

Says director Anne Walsh: “The Christchurch Call showed international leadership in bringing change globally as to how multinational digital companies operate differently in the spread of terrorism and misinformation”.

The handling of the two other major crises over the past year also rate among Ardern’s top KPIs: Whakaari / White Island (3.94/5) and the Covid-19 crisis (3.90/5).

“No one would wish them on any PM. Jacinda has demonstrated genuine compassion towards her constituents,” says Precinct Properties chair Craig Stobo. “She is an outstanding politician who may be able to govern New Zealand without a coalition partner.”

The Government’s Covid response is a key part of Labour’s election campaign, with Ardern pointing out that relative to other countries, New Zealand is more open. She says our recovery is on track to be better than Australia’s with lower debt and unemployment levels and fewer deaths.

Ardern’s charismatic performance has received admiration on the international stage this year, with stark contrasts made between her Covid-19 response to the likes of US President Donald Trump and UK Prime Minister Boris Johnson.

Her ability to leverage her brand for New Zealand’s international advantage has again rated highly with CEOs scoring this 4.23/5. Says Erica Crawford, “She is one of New Zealand’s best assets on the global scene, she needs to cheerlead New Zealand.”

Another high-scoring KPI for Ardern is her political performance (3.84/5).

It will be disappointing to Ardern that child poverty reduction, a portfolio for which she is responsible for and has expressed a strong desire to address, was her second lowest KPI, receiving a score of 2.10/5.

But one of the most troubling KPIs for executives is Ardern’s ability to build confidence within the business community — for that they rate her 2.13/5. They say that Ardern’s repeated calls for kindness and empathy in politics alone do not make a great leader: “you need a workable plan and know-how to deliver it with and through others”. A director says “she does not inspire confidence that she understands business — but she does need business to succeed to generate jobs and pay taxes.”

They say her success as leader is driven mostly by the figurehead aspects of the role. But notes a professional director: “the hallmark of great leadership is having a superb team around you — and apart from Robertson — she just does not have that”.

“Labour has a very superficial engagement with the business community,” says a multinational boss. “They do the bare minimum and have no ministers outside of Grant Robertson who really understand business at all.”

Mood of the boardroom: CEOs compare finance rivals Grant Robertson and Paul Goldsmith (NZ Herald)

Grant Robertson: Capable, calm, credible

Chief executives send a clear message to Minister of Finance Grant Robertson: You’ve done well, but the real test is yet to come. It is testament to his performance in the wake of Covid-19 that, asked whether Robertson has been a credible Minister of Finance, an overwhelming majority of CEO respondents to the Herald’s 2020 survey — some 91 per cent, said Yes. Just 5 per cent said No; 4 per cent were unsure.

This rating is up considerably from last year. Robertson’s rating in the 2019 Mood of the Boardroom survey had 54 per cent of respondents say Yes to that same credibility question and 29 per cent unsure.

He is the highest-scoring minister, receiving a rating from respondents of 4.18/5 for ministerial performance. To put this score into perspective, this is the highest rating a Minister has received in the Mood of the Boardroom Survey since then-Finance Minister Bill English in 2016, where he received a rating in John Key’s Cabinet of 4.51/5.

On his performance as finance minister, the word “capable” was frequently used. Fletcher Construction CEO Peter Reidy says he is “capable, calm and credible”.

NZ International Business Forum executive director Stephen Jacobi describes Robertson as “a source of strength and stability for the Prime Minister and the Government”. Says a transport executive: “thank goodness he is influential in cabinet”.

Beca CEO Greg Lowe says that Robertson has a good grip on the economy, its drivers and what makes it succeed. “He is a hardworking and capable minister,” he says. “Engagement with business is good but we could improve the teamwork between government and business.”

It was this influence that saw him fulfil Labour’s 2017 campaign promise to reduce net core crown debt to below 20 per cent of GDP in 2018.

“Robertson has done a superb job for three years,” says a government relations firm boss. “Where are the loony lefties now who cried out for him to spend spend spend when New Zealand had a sizeable surplus? He stared them down — thank God!”

Since the early days of the Covid-19 crisis, Robertson has proven his mettle in the eyes of New Zealand’s business elite. He has grown into this role and was superb throughout Covid — “whether we agree with his policies or not”, says a real estate boss.

He rolled out the  wage subsidy just days after the Government’s response to the pandemic was put in place. The subsidy was initially  for 12 weeks over the lockdown period,  then extended a further eight weeks for businesses still experiencing a significant hit to revenue. A third extension was announced when Covid  re-emerged in August.

The Government also introduced a temporary 12-week income relief payment for those who had lost  jobs, low interest and interest-free loans for businesses, and changes to the tax system to encourage investment.

Many top business leaders responding to the 2020 Mood of the Boardroom survey say their companies accessed the wage subsidy  —  41 per cent received the first iteration, 16 per cent received the second. “This was an excellent initiative. Quick and sharp response,” says a healthcare chief.

Some see it differently. A banking chair says  “as Minister of Finance, he has held the line in a number of areas, but has allowed Government spending to run riot over the pandemic”.

Independent director Cathy Quinn says the wage subsidy was “an important step to keep people in work and the economy going.”

But she says we now need business to adapt to the tough new environment as the Government can’t afford to subsidise indefinitely.

An executive in the transportation sector says “the real test will be if he gets back and whether he can drive quality spending as opposed to a lolly-scramble”.

Mainfreight CEO Don Braid says   Robertson has performed well under the conditions  — but notes “the real challenge now lies ahead”.

That challenge is New Zealand’s economic recovery, and the hefty Government debt. According to the Budget, Government debt will peak at 2024 when it hits $219 billion (just under 60 per cent of GDP).

Robertson insists New Zealand will pay down its increased debt  over time, through growing the economy. He has ruled out cutting significant public services and income support.

“When I look back to the late 80s and early 90s  I saw a different kind of approach to recovery from a downturn, one that was more of an austerity-based one — it was young people who bore a lot of the brunt of that.  I am determined we won’t allow that to happen.”

The Government’s approach was to invest in  young people now through training and job support.

Chair of Precinct Properties, Craig Stobo, says Robertson has been “unruffled and steady,” adding “the spectre of the 80s economic reforms informs his policy preference”.

It is unsurprising most CEOs focused on Robertson’s performance in relation to the Government’s Covid-19 economic response. However, there is   underlying disappointment that he has — so far — lacked long-term vision, and hasn’t used his position to deliver on the transformational change Labour campaigned on in 2017. A real estate boss says: “he lacks depth and strategic focus — it is all about the now.” Adds an executive recruiter: “I have severe concerns over his lack of focus and long-term thinking.”

The chief executive of an investment firm says: “He did a sound job in his first two-and-a-half years but he had the opportunity to create a massive lasting legacy and transformational change with the big spend up and appears to have wasted the opportunity on instead spreading money in every direction.”

Paul Goldsmith: Needs confidence, clarity

New Zealand’s top chief executives want Paul Goldsmith to find confidence and clarity.

National’s finance spokesperson has yet to make a major impact with many top business leaders, perhaps because he has been overshadowed during National’s leadership turmoil.

“Paul, like many in the opposition have been starved of oxygen in terms of public voice or debate,” says Deloitte CEO Thomas Pippos. Precinct Properties chair Craig Stobo has a similar view: “He has emerging credibility but low share of voice.” The 2020 Herald Mood of the Boardroom survey asked executives whether Goldsmith presented as a credible future minister of finance. Fifty-three per cent of respondents said Yes; 22 per cent said No.

The remainder — a significant 25 per cent — say they are still unsure, with many noting Goldsmith has lacked visibility at a time where strong opposition is needed.

“He’s been meek,” says an executive in the wine industry.

“He should have had a field day with this Government,” says an investment banker. “But he has been very quiet in Opposition.” Another high-profile banker says: “I haven’t seen enough to suggest he is a credible future minister of finance, but give him the benefit of the doubt.”

“Based on what little I have seen, he seems to be okay — but I am not ready to say ‘yes, he’s a credible future minister of finance’,” adds a recruiter.

This morning, Goldsmith will debate with Finance Minister Grant Robertson at the launch of the Mood of the Boardroom Election Survey. Several of New Zealand’s top bosses note that compared to Robertson — who received a positive response from 91 per cent of CEOs — Goldsmith lacks credibility.

Grant Samuel managing director Michael Lorimer says Goldsmith does not have a good grasp of the issues: “This was evidenced at last year’s breakfast debate and he has not improved since,” he says. “He needs to put up ideas — not just point out the faults in the Government,” says a healthcare boss. “While I don’t like Labour’s policies, I think Grant Robertson is a far better and more credible Minister of Finance.”

“He’s not as strong as Grant, but he has made some excellent suggestions and would be tested if he became minister, which would give him the chance to raise his credibility.” says an executive in the real estate sector.

But Goldsmith should take heart. The Opposition finance spokesperson is typically challenged when compared to an incumbent who has become established in the role.

Robertson also faced a hurdle connecting with the business community prior to taking the helm.

In the 2016 Mood of the Boardroom survey — when Robertson was up against  Bill English — one banker suggested Labour should replace him with “someone who understands the portfolio, like David Parker”. In the eyes of CEOs, Robertson is now their top performer.

Goldsmith took on the finance portfolio in June last year and was elevated to third in the party’s parliamentary rankings under Simon Bridges’ leadership.

He won praise as Opposition finance spokesperson in the early days of the Covid-19 pandemic.

Goldsmith commended the Government for the wage subsidy package and its Covid leave support. But he also called for more targeted and specific support for business with more rigorous measures around it if a wage extension was introduced — something that is now being debated as it comes to light that some large, profitable companies likely took advantage of the subsidy.

The tone he used to deliver his criticism of the detail in the Government’s economic response was in stark contrast to then-leader Simon Bridges, which drew strong condemnation and ultimately led to his demotion.

“Paul has continued to work hard and push on detail,” says a transportation boss.

Goldsmith retained the finance portfolio under Todd Muller’s brief stint as leader but dropped in ranking to number five — bouncing back to number three when Judith Collins assumed the leadership.

Despite his backing in the role by three leaders, CEOs say Goldsmith is still yet to prove he’s got the chops to run the government books. But they also acknowledge he is in an unenviable position, following in the footsteps of some high-performing predecessors — former National Party finance minister Bill English consistently rated top of cabinet during his tenure as finance minister.

“I compare him to Bill English — a hard act to follow,” says a CEO in the agricultural sector.

“I like Paul — and he is smart,” says a top lawyer. “But scratch beneath the surface and he can’t answer follow up questions.”

Another major concern raised by CEOs is Goldsmith’s lack of ability when it comes to communicating and connecting with the business community and the broader public.

“He is not really a retail politician, but he is extremely bright and is a very fast learner,” says a professional director.

“He is not yet credible, but he has the brain, if not the communication skills — he’s very dry,” says a lobbyist. A CEO in the transportation industry says he lacks mana and presence — “too much IQ and not enough EQ!”. Another CEO shares a similar view: “He’s dry, but capable.”

The head of an investment firm sends the following advice to Goldsmith: “He needs to command the key points and deliver them with more confidence and clarity.”

A real estate boss gives a backhanded compliment — referring to Goldsmith’s extracurricular interests: “He’s an excellent art historian.”

Mood of the boardroom: Wage subsidy a jobsaver for many (NZ Herald)

Some sectors have even taken on staff writes Tim McCready

Business leaders say the wage subsidy the Government implemented to support firms that had taken a revenue hit from Covid-19, was an important step to keep people in work and the economy going.

The Mood of the Boardroom 2020 survey revealed 41 per cent of respondents accessed the first round of the subsidy, and 15 per cent — the second round.

The subsidy was received across myriad industries, and those that took it up say it was a quick and sharp response that bolstered confidence and saved jobs. “I think this saved many jobs,” says a healthcare boss. “We did not make people redundant because of this, and they remain employed post the subsidy ending.”

“It was a significant help during times of extreme uncertainty to support staff and give them surety of employment,” says Fulton Hogan CEO Cos Bruyn.

There have been reports of some companies rorting the system and claiming wage subsidies they may not have been entitled to but some survey respondents say although they may have been eligible for the support, their businesses chose not to take it up.

LIC chief executive Wayne McNee says given how the business performed for the full year, the firm chose not to use it. A tech CEO says, “we felt it was a badge of honour not to need or use the wage subsidy in the first or second round”.

Chief executive Don Braid says Mainfreight applied and received $10.6m — qualifying under the rules. “But we returned the full amount when we recognised we were better off than others and could see improvement occurring.”

One CEO says their company accessed the first round, but repaid it in full as soon as it was clear the impact of Covid was less than projected. “It was hugely helpful in giving us the confidence to maintain full employment and remuneration at a time when some competitors were cutting one or both.”

But business leaders caution: “We need business to adapt to the tough new environment and the Government — and indeed New Zealand — can’t afford to keep subsidising business indefinitely.”

Business resizing — not just down

The buffer provided from the subsidy has no doubt saved jobs. Exactly half of the survey respondents say they haven’t had to downsize staff during the pandemic.

But even so there have been a significant number of casualties from the crisis — some 17 per cent say they have had to downsize by more than 10 per cent. Although some note the full impact of job losses will be revealed once the ventilator of the wage subsidy wears off.

The most dramatic reduction in staff numbers has been in the tourism industry.

But 8 per cent of respondents say they have upsized due to the impact of the  pandemic. These are from a range of sectors, including food and agribusiness, banking, investment, professional services and IT firms. There have been several reasons for the staffing increase.

“We are taking the approach of investing through this crisis,” says ASB CEO Vittoria Shortt. “This means providing permanent roles for contractors and recruiting more people into our business.”

Chapman Tripp chief executive partner Nick Wells says there have been fewer departures from the firm: “Few want to leave for overseas, so we have grown slightly compared to what we would typically expect.”

A professional director says one of her companies initially pushed pause on recruitment — “however it very quickly became apparent that the needs of our customers required us to accelerate progress in order to continue to help with their evolving needs.”

CEO Chris Quin says Foodstuffs North Island upsized 6 per cent at peak due to panic-buying and growth in online.

Mixed impact on production levels

CEOs were asked how Covid will impact production levels within their businesses. The result is mixed over the coming two quarters, with a few (4 per cent) expecting a significant decline of more than 80 per cent, but others expecting no impact or even growth in production levels.

A law firm head: “We saw a decline over the past three months that averaged out at 20 per cent. A trend in the right direction is now evident — but still down  year-on-year.”

Most in primary industry and food and beverage say they don’t expect to see a significant impact in the coming months. “Demand persists for premium infant formula in the China market,” says director Ruth Richardson. “Demand signals remain very positive,” says an agribusiness boss. “But we do have a lingering concern — perhaps through our approach of being constructively paranoid — that the music will stop and there won’t be enough chairs.”

As has been the case for many aspects of Covid-19, CEOs say  in many cases production levels will depend entirely on the pandemic — and therefore the future remains uncertain.

“It depends totally on expectations of further Covid incursions, shutdowns and the opening of borders to both shows, sports teams, artists and tourists,” says non-executive director Joanna Perry.

From a food and beverage boss: “This is a hard question to answer looking forward as it all depends on the Government’s ability deliver on its elimination strategy.”

Production is clearly not just a domestic issue. A slowdown in world trade growth (which CEOs score among their highest international risks at 7.64/10 on a scale where 1= no concern and 10=very concerned) contributes to general uncertainty and nervousness in the business community in terms of future production levels.

MinterEllisonRuddWatts’ Lloyd Kavanagh: “We need to plan for each of the scenarios, and be agile in adapting depending on what unfolds. We can’t  project one outcome when there are so many variables.”

 

 

Covid changes

The disruption in the way businesses operate as a result of Covid-19 has been a catalyst for businesses to adopt new technologies more quickly than they expected and accelerate their use of existing technologies. McKinsey estimates this rapid migration to digital technologies has seen us vault five years forward in consumer and business digital adoption in a matter of around eight weeks.

The Mood of the Boardroom survey asked CEOs how the Covid-19 crisis has changed the way in which their business is conducted.

On a scale of 1 to 5, where 1= strongly disagree and 5=strongly agree, the top-rated changes to businesses are: increased use of online meetings (4.63/5), increased use of technology (4.45/5), more flexible working (4.36/5), accelerated growth of e-commerce (4.33/5) and reduced international business travel (4.31/5).

Beca’s CEO Greg Lowe said he was surprised during the initial lockdown at the effectiveness of working from home both for Beca and for its clients.

“The increased use of virtual meeting technology has not only increased the skill levels of all of us, we have realised that we can be more productive from remote locations and carry out more of our business activity remotely than we thought.”

Beca managed to maintain its delivery to its clients with thousands of people working from home — but that this is not a sustainable business model in the long term.

“Building relationships, developing people, creating more effective teams, increasing productivity all needs some form of person to person engagement. While undoubtedly we will see more flexible working (for many reasons) and less travel, I do not believe that large numbers of people want to work permanently from home.”

The adoption of flexible working saw one energy CEO reduce their organisation’s footprint and rethink the use of office space. But an investment fund boss reckons the importance on office space from more people working from home is overrated — “but this will be impacted by economic factors”.

Precinct Properties chair Craig Stobo says “the Covid wave has accelerated the digital wave”. Another executive in the tech sector says New Zealand should “use this to become a digital nation!”

A property CEO says Covid has given their organisation a greater appreciation of the critical importance of business continuity planning. “It is no longer a ‘nice to have when we get to it’ item on the board agenda.”

An increased focus on staff wellbeing and social purpose was also mentioned from executives spanning various industries as a major change from Covid.

“We have had a complete rethink on the role of HR and how teams work — including salary and incentive structures,” said one CEO in the utilities sector.