Infrastructure: Credit for green credentials

Green finance is an important focus for ICBC. Kevin Xu explains to Tim McCready how the bank is active in global sustainable financial governance, learning from international practical experience, and contributing financial power to serve the sustainable development of the economy, society and environment.

Herald: ICBC’s attention to environmental, social, and governance (ESG) factors is growing. How is this affecting the bank’s involvement in international infrastructure projects?

Kevin Xu: ICBC has fully integrated ESG and green financial management into its investment and financing processes. Our head office has formulated green investment and financing policies for 16 sectors and nearly 50 industries, including infrastructure construction, and has positioned key areas such as green transportation, clean energy, energy conservation and environmental protection as active or moderate entry into the industry.

Environmental, climate and social risks arising from the credit granting process have been brought under classified management. Differentiated credit policies have been implemented in domains such as economic capital occupation, authorisation, pricing, scale, and a “one-vote veto system” is used for environmental protection. Green management requirements are extended to a wide range of investment and financing businesses lines such as bonds, wealth management, leasing.

ICBC New Zealand follows head office’s approach and has been actively involved in local infrastructure projects. More than NZ$300 million in loan commitments has been provided to support NZ renewable energy, sustainable projects in the past 12 months.

Herald: What factors do you take into account when integrating ESG factors into investment decisions?

Xu: We pay close attention to hazards and related risks that financing customers and related parties may bring to the environment and society in construction, production, and business activities. This includes energy consumption, pollution, land, health, safety, resettlement, ecological protection, environmental and social issues related to climate change.

ICBC implemented the “one-vote veto for environmental protection”for the entire investment and financing business process. The customer credit risk rating has embedded ESG factors.

Environmental risk factors are included in the customer rating model, including corporate environmental credit rating and green credit classification index. For corporates that are environmentally unqualified or unfriendly, the rating model will prescribe a limit to the customer’s credit rating.

The customer rating model covers governance risk factors, and incorporates corporate governance and corporate management indicators, including corporate governance structure, shareholder control, and related party transactions.

The inclusion of negative environmental events in the rating and early warning monitoring system, including factors such as environmental violations.

Our head office also clearly requires relationship managers to prudently evaluate the environmental and social risks of customers during the due diligence process and has introduced relevant supporting policies and systems.

Herald: What else does the bank take into consideration for infrastructure projects?

Xu: We also consider credit risks, market risks, country risks and other related factors that may affect investment safety and returns.

ICBC implements a unified credit risk appetite for all types of credit risk exposures across the bank, and implements full-process management of credit risk, covering the entire process from customer investigation, credit rating, loan evaluation, loan review and approval, loan issuance to post-loan monitoring.

For cross-border investment and financing, we also need to pay attention to the country risk of the country or region where the counterparty is located. ICBC uses a series of management tools to manage and control country risk, including country risk assessment and ratings, country risk limits, country risk exposure statistics and monitoring, and stress testing, etc.

Anti-Money Laundering is also the focus of our attention in handling investment and financing business. We strictly abide by relevant Anti-Money Laundering laws and regulations and steadily promote customer identification governance and high-risk areas management.

Herald: What impact has the pandemic had on ICBC’s infrastructure projects?

Xu: The outbreak of the pandemic and its prolonged duration have had varying degrees of impact on many industries, including infrastructure, and some projects are facing a certain degree of difficulties in supply chain operation and capital turnover.

ICBC actively fulfils its responsibilities as a corporate citizen by coordinating the prevention and control of the pandemic, financial security, and operation and management, and actively carrying out special activities to ensure the sustainability of the supply chain of large enterprises and the uninterrupted capital chain of small and medium-sized enterprises.

In the global fight against the pandemic, we will fulfil our responsibility, demonstrate our care and concern, and protect our beautiful home together.

Yangjiang Nanpeng offshore wind farm

ICBC approved a loan of RMB 1.6 billion yuan for the Yangjiang Nanpeng Island offshore wind farm project.

The 401.5MW project features 73 wind turbines and is the first single large capacity offshore wind power project in China. It is also the first offshore wind power project in Guangdong Province that is more than 10 kilometres away from the coastline and more than 10 metres deep.

Completed at the end of last year, the offshore wind farm can generate 1.015 billion kWh of annual on-grid power. This is expected to save 311,500 tons of standard coal and reduce carbon dioxide emissions by 828,800 tons every year.

Dubai solar thermal power plant

ICBC is the lead arranger for the construction of one of the world’s largest and most advanced solar thermal power plants.

The 700MW concentrated solar power and 250MW solar photovoltaic power station in Dubai has been jointly invested by Dubai Electricity and Water Authority (DEWA), ACWA and Silk Road Fund.

With a total investment of US$4.3 billion, the project is the largest new energy project financing in the world and has been highly recognised by the market. As the lead bank, ICBC arranged a US$2.5b senior syndicated loan with members from China, Europe and the UAE.

Concentrated power systems generate solar power by focusing a large area of sunlight into a small area.

The light is converted to heat, which is stored in molten salt to supply electricity on demand during the day and through the night.

This method of power generation makes up for the instability of solar power generation and the impact on power grids and ensure the stability of power supply.

The power plant is an important project under Dubai’s clean energy strategy and is expected to provide clean power to more than 270,000 households in Dubai every year, with zero emissions of carbon and pollutants.

The power plant will reduce carbon dioxide emissions by 1.6 million tons and will create 4000 direct jobs and more than 10,000 indirect jobs, providing local employment and economic development.

Baodi district solid waste power generation

With the increasing volume of municipal solid waste in Baodi District, Tianjin, China, the capacity of the original landfill site was not able to meet the needs of the community. To solve this problem, Tianjin Quantai Domestic Waste Treatment launched a domestic waste incineration power generation project.

ICBC granted a loan of RMB255 million yuan to assist with construction. The project began operations in December 2020 and has changed the method of domestic waste treatment from landfill to incineration. It is preventing the pollution of domestic waste into the soil and underground water sources and reducing reliance on fossil fuel-based power and heat sources and CO2 emissions by using waste as a resource for power generation.

Kevin Xu is Team Head, Corporate & Institutional Banking at ICBC New Zealand.

ICBC is a sponsor of the Herald’s Infrastructure report.

APEC CEO Summit 2021: Highlights and insights

The full APEC CEO Summit is now available to watch, free, here.

Over two days in November, the world’s most influential political, business and thought leaders came together for the APEC CEO Summit 2021 to discuss ways the region can learn from each other and work together and to ensure it emerges from the pandemic stronger than ever.

The Summit addressed challenges and opportunities presented by the current situation, with a focus on five themes: the state of the world with, and post Covid; the digital disruption opportunity; the primacy of trust; the future of energy; and the sustainability imperative.

The state of the world with and post-COVID

The Summit was set at a complicated economic period as the world rebuilds in the wake of the pandemic. Just a year prior, the region’s economy saw a record contraction of -5 per cent, with estimates suggesting the Asia-Pacific lost over $2 trillion in potential trade over 2020.

This downturn was both faster and deeper compared to the global financial crisis – although will likely be shorter. Demonstrating this rapid turnaround, the last quarter saw record growth of 10 per cent in the region.

Keynotes from PwC global chair Bob Moritz and OECD Secretary-General Mathias Cormann, along with Dr Alan Bollard’s panel discussion on the economic state of the world helped to decipher the recovery and set the scene for the Summit. While the tone from speakers was optimistic, they cautioned the economy is still significantly impacted by the ongoing disruption of the pandemic and can be seen reflected in myriad contradictions.

The dramatic increase in trade is predominantly occurring in merchandise, with the region experiencing a chronic shortage of goods to meet demand, yet services trade is still worryingly negative.

  • Domestic investment has been increasing, but foreign direct investment is at a 20-year low.
  • Costs and wages are increasing, but productivity is stagnant.
  • Jobs are being displaced, but skills shortages are being reported widely across the region.
  • Uncertainty and significant downside risks remain, including inflationary pressures and the emergence of new Covid strains, vaccination levels and continued disruption from the pandemic – including the fourth wave beginning to sweep through Europe.

But the recovery is also providing the region tremendous opportunity – particularly for those businesses able to adapt and grow quickly and create supply chains that are robust and scalable.

Prime Minister Jacinda Ardern, this year’s APEC chair, said in her opening address:

“We have a saying in New Zealand. He rau ringa e oti ai – many hands make light work.

“The heavy load of a global pandemic that in equal measure threatens lives and livelihoods has been countered only with an extraordinary commitment to unity, partnership and progress in spite of the challenges.”

Former New Zealand Prime Minister and Administrator of United Nations Development Programme Helen Clark shared a similar sentiment, reminding delegates that they must work together and grab hold of the positives that can come from standing up to a crisis.

“We can strengthen our national systems for pandemic preparedness and response, and we can strengthen the global systems. All of that is good for business,” she said.

“If we are looking at the world we are trying to create, inclusion going forward is critical. But we must also build in resilience. Because if we don’t have resilient systems like with pandemic preparedness and response, we will repeat these lessons over and over.”

Recently elected President of Peru, José Pedro Castillo Terrones, shared a similar view, noting the APEC forum “is an important space for coordinating measures and identifying good public policy practices to face complex health and economic challenges.”

The digital disruption opportunity

While all economies across the APEC region have been impacted by the pandemic, there is clear evidence that those with digital readiness endured the pandemic and rebounded better.

Economies with both physical and digital infrastructure have been faster to deploy digital tools in the fight against Covid-19 – including contact tracing, proof of vaccine and digital trade facilitation – which has enabled them to keep their economies more open.

The pandemic acted as an accelerant and removed hurdles for innovation. Five years’ worth of technology adoption occurred within the first eight weeks of the pandemic, and the importance of its role as an enabler of trade was reiterated in almost every session at the Summit.

“The companies without digitalisation have been hit harder,” said Diane Wang, chair and CEO of DHGate. “They are at a crossroads… the choices we make today will have consequences on gender equality, digital equality and inclusive growth, for decades to come.”

In her keynote address, technology entrepreneur Amber Mac cautioned CEOs that “it may feel like there is a thick line between what you do and what big tech does, but as you embrace a tech-first strategy – an obvious path to succeed in today’s digital world – that line will soon begin to blur.”

Companies, government, and the public sector were urged to continue to seize the opportunities from digitalisation, with a heavy emphasis that the economic recovery post-Covid will continue to be digitally enabled.

Micro, small and medium enterprises (MSMEs) are particularly vulnerable to the economic impacts of the pandemic. With MSMEs making up over 97 per cent of all enterprises in the region and employing over half the workforce, digital adoption and access to innovation and will be essential for all business.

This was highlighted by Singapore Prime Minister Lee Hsien Loong, who stressed that most SMEs are not as digitally prepared as large businesses, and risk being left behind. “APEC economies must help SMEs and their workers make the digital transition,” he said.

He also acknowledged that the rapid uptake of digital innovation means that APEC economies need to do more to invest in the digital frameworks of the future, including digital identity, digital payments solutions, data exchange, data authorisation and consent.

Australian Prime Minister Scott Morrison used his address to express his concern over the rise of technology, and the ability for it to be used for bad, as well as good.

Morrison called for stronger rules for the tech sector and suggested it would be better for the sector to work in partnership with governments on regulation – saying that if not, governments will do it anyway, and “will stuff it up because they don’t understand it the same way.”

The primacy of trust

Along with digital adoption, the pandemic has also accelerated the erosion of trust around the world. There is an epidemic of misinformation and widespread mistrust of societal institutions and leaders around the world.

This extends to business, and as trust expert and public relations leader Richard Edelman told the Summit, earning trust has never been more important – or more challenging.

He described how employees have emerged as the most important stakeholder in business, with people “voting with their feet” and making major decisions – including what they buy and who they work for – based on personal beliefs.

The growing expectation of business to focus on societal engagement with the same rigor, thoughtfulness and energy used to deliver on profit was evident from delegates – the primacy of trust quickly became the most interactive session at the Summit, attracting robust discussion through the conference platform.

Edelman explained how consumers, employees and other broad stakeholders are paying more attention to what businesses say and do, and how they respond to issues including climate change, racial injustice, and other societal issues.

Intrinsically tied into trust is the need for business to apply environmental, social and governance (ESG) principles to their strategy and operations to create value for all of society.

Reiterating Edelman, the ESG panel told the Summit that there is now a much broader group of stakeholders that must be considered, including employees and the community. But beyond this, there is a growing consensus that ESG has become an extremely powerful driver for business success and financial return and is no longer seen as something that only adds costs to business.

The panel called for business leaders across the region to put ESG front and centre, integrating the principles into the purpose and values of an organisation and ensuring their commitment is actionable, verifiable, and transparent.

“The actions required are expensive, substantial, and they have to be core to an organisations strategy,” said McKinsey’s Andrew Grant. “They can’t just be window dressing or a box-ticking exercise.”

The panel said that businesses must lean in and recognise that doing good for society is also good for business.

This call for business to be a force for good in the world was repeated in the highly anticipated keynote address from international human rights lawyer Amal Clooney. She told delegates that we no longer live in a world where businesses can say ‘human rights are none of our business’.

“It is increasingly difficult for companies to say ‘we are just here to make a profit’ and bury their heads in the sand,” she said.

“Businesses, big multinational corporations, and tech companies in particular are a key part of our multilateral world of decision-makers, and each one will decide whether to be a force for good or complicit in abuses of power.”

The sustainability imperative

The Summit was unique this year, with a political leader from outside the 21 APEC economies asked to give a perspective from outside the region. The conversation between German Chancellor Angela Merkel and New Zealand Prime Minister Jacinda Ardern traversed the state of the world, Covid-19, digital innovation, sustainability and leadership.

While the discussion gave many fascinating insights, one of the key points raised was the need to take the lessons from Covid-19 and to apply them to other critical areas. The pandemic forced governments and businesses to act with urgency and in partnership with different sectors and communities who know their people best.

This same principle could be applied to manage other world problems, including climate change, scaling the uptake of renewable energy, and dealing with pressing environmental and biodiversity issues.

“Never before have we been able to realise how interconnected we are globally,” said Merkel.

“What is happening here influences what is happening in Africa, in New Zealand and in the United States of America. That sense of how small our globe actually is when it looks to the spread of such a virus should continue to guide us when we tackle issues like biodiversity and climate protection.”

This message was echoed by Canadian environmentalist Dr David Suzuki, who gave a deeply passionate keynote address. He told attendees that the planet is “at code red – and that spells trouble for humans.”

“Nature pays no attention to human laws and borders,” he said. “We are animals. If we don’t have air for three minutes we die and if it is polluted, we get sick. But we use air as a garbage can for toxic waste. We must show reciprocity and responsiveness so nature can continue to be abundant and generous.

“Success as a species is to look ahead, recognise dangers and opportunities and choose a deliberate path to avoid danger.”

Viet Nam President Nguyen Xuan Phuc affirmed the strategic importance of sustainable development and climate change response for the region.

“Our green planet is shaken by cumulative and unprecedented impacts caused by climate change, extreme natural disasters, environmental degradation, and the COVID-19 pandemic,” he said.

“Time is not on our side, for these challenges continue to worsen with every passing day. Thus, we need to work closely together to overcome such hardships.”

A similar call was echoed by President of the People’s Republic of China, Xi Jinping.

“APEC economies should make its post-pandemic recovery a green one and take the lead in making a science-based response to climate change,” he told the Summit – just hours after announcing a surprise plan with the US to work together on cutting greenhouse gas emissions in the crucial next decade.

The future of energy

The APEC region demands around 60 per cent of the world’s energy consumption, and transitioning to new forms of clean energy production and consumption will be an essential part of meeting our climate change challenges.

In her keynote address on future energy challenges, Tesla chair Robyn Denholm told APEC economies that they must act now to accelerate their transition to renewable energy to power utilities, vehicles, communities and homes.

“We all succeed or fail together in the race to zero emissions,” she said.

Denholm said the growth in electric vehicle sales was encouraging, but it would be a steep climb to eliminate combustion engines. Getting there would require a joint effort between the public and private sector, with significant capital investment and supporting policies that set standards and deadlines on emissions to accelerate the transition.

“Vehicle pollution reduction will be only as fast as our ability to ramp up battery production and EV manufacturing,” she said.

In the panel on future energy solutions, Blackrock managing director for renewable power and sustainable investing Dr Valerie Speth, told delegates that there is no topic ranking higher than climate change and decarbonisation among her colleagues and investors.

“It is the best investment opportunity for the coming decades,” she said.

A similar message was shared by President of the Republic of Korea, Moon Jae-in. His administration has closed domestic coal-fired power plants, stopped permits for new ones and cut public funding for new overseas coal power plants.

“Instead, we are expanding the use of safe and clean energy,” he said. “By 2025 we will have more than doubled solar and wind power facilities from 2020 levels.”

South Korean companies are making a $37 billion investment in and exploring partnerships on all aspects of the hydrogen economy from production to distribution to end use.

He said that as an economic forum that represents 61 per cent of world GDP, APEC “will stand at the forefront of cultivating the hydrogen economy ecosystem.”

Looking to the future

The Asia-Pacific region is home to 270 million indigenous people, making up around 70 per cent of the world’s indigenous population. Yet the full potential of the community’s contribution to the region’s economy remains largely untapped and was disproportionately impacted by the pandemic.

The panel on the indigenous economy featured speakers from Aotearoa New Zealand, Canada and Australia, and discussed indigenous leadership and the ethos of putting culture at the centre of decision making.

Rangimarie Hunia, chief executive Ngāti Whātua Ōrakei Whai Māia, told the Summit that indigenous people have values and approaches that are ancient.

“When we start to be in the game of business, we take those values and we apply them to the long-term, not the short,” she said. “When I hear things like planet over profit, that has been our way of doing since time immemorial.”

Continuing the theme of ‘looking to the future’ was a focus on young people, who make up one-third of the region’s population. The Summit had the most ever young people attend as delegates, as well as many younger voices featured in keynotes and panels throughout.

One of the most inspiring keynote addresses came from Jerome Foster II – aged just 19 and the youngest ever adviser to a US President.

Foster was appointed to President Biden’s Environmental Justice Advisory Council after spending every Friday for 58 weeks campaigning for the climate outside the White House during Donald Trump’s presidency.

He encouraged other young people attending the Summit to know that they “have so much potential… this is the perfect time for you to really step into that, and to merge your passion with what you want to do for a living.”

“As a young person it often feels like you’re inheriting an Earth that is completely backwards,” he said. “But it is now our role to figure out how we are going to make that better.”

It is the next generation, after all, that are the biggest stakeholders in the work that APEC is doing.

Watch Tim McCready and panel: Fran O’Sullivan, Brent Wilton and Hannah Pattullo discuss what was learnt at the 2021 APEC CEO Summit.


APEC CEO Summit 2021: ‘What have we learnt?’ panel (video)

APEC CEO Summit 2021: Jerome Foster II interview (video)

APEC 2021: The Kiwi women moving the world forward at Apec 2021 (NZ Herald)

APEC 2021: The Kiwi women moving the world forward at Apec 2021 (NZ Herald)

Women’s economic empowerment has been a key pillar of Apec’s work, and since New Zealand last hosted Apec two decades ago, has made significant gains.

Economies across Apec have worked together to promote those with “untapped economic potential” — people who have faced barriers to full economic participation — to provide the energy and vision for future growth.

A key focus of this work has been addressing the structures that hold back women’s full economic participation. While there is still significant progress to be made, as this year’s host New Zealand is leading the way with three women — Andrea Smith, Barbara Chapman, and Rachel Taulelei — holding pivotal roles to deliver the year’s event.

Andrea Smith

One of the key diplomats leading New Zealand’s year as Apec host is Andrea Smith, Apec deputy secretary at the Ministry of Foreign Affairs and Trade.

She has been in the role since 2017, and in that time has seen events that have put New Zealand’s hosting of Apec at risk — including the fire at the Sky City International Convention Centre fire where the CEO Summit was originally to be held, and the Covid-19 pandemic, which ground travel to a halt and forced Apec to go fully virtual.

Smith says that as host, New Zealand is at the leading edge of shaping the agenda for the Asia-Pacific and has “skin in the game”.

“Fourteen of our top 20 export markets are Apec members, including the three largest economies in the world — the United States, China and Japan — and 18 of our 19 free trade agreements are with Apec partners.” says Smith.

APEC 2021: Think Apec on Zoom is wild? Try Russia in 2012 (NZ Herald)

APEC 2021: Think Apec on Zoom is wild? Try Russia in 2012 (NZ Herald)

I was a participant in Apec’s Voices of the Future in 2012, held in Vladivostok, in Russia’s far east. The world looked considerably different back then.

Hu Jintao addressed the CEO Summit as President of China, Hillary Clinton gave a speech as US Secretary of State, on behalf of then-President Obama who was campaigning for the upcoming election, and Australian Prime Minister Julia Gillard was part of an education panel discussion, before having to depart early after of the death of her father.

As a New Zealand Voices of the Future delegate, I spent time with Prime Minister Sir John Key just ahead of his bilateral with Russian President Vladimir Putin, where the two were set to discuss the free trade agreement between New Zealand and Russia (negotiations were suspended in 2014).

Key spoke candidly about what it was like to represent New Zealand, a small economy, as an equal at the Apec table and engage with the world’s most powerful leaders.

Of course, one of the highlights of travelling to Apec was the cultural immersion and the people I met.

Russia went all out hosting Apec — US$21 billion was spent getting the city ready for the summit, vodka and caviar were prominent features at networking events, and a US$9 million firework display at the closing ceremony was one of the most extraordinary things I’ve ever seen.

At the summit’s gala dinner, I was introduced to the father of one of the Russian Voices of the Future participants. He was surrounded by bodyguards, and, unbeknown to me, was the Russian Energy minister.

I gave him my last remaining gift from NZ — an Ecoya candle. In exchange, he reached into his jacket pocket and handed me a large gold coin, minted to commemorate the new 1800km-long gas pipeline to Vladivostok.

Fast-forward nine years and it is NZ’s turn to host Apec. Things look so different now, with the pandemic requiring the summit to be delivered live over a virtual platform.

This year, I am the content producer for the Apec CEO Summit, as well as MC for the Voices of the Future programme. While the pandemic has meant attendees miss out on a visit to New Zealand, technological developments allow them to still experience NZ’s characteristic values of manaakitanga and whanaungatanga — a shared sense of humanity and connectedness — and work together on the issues that matter to them.

In 2012, when I helped write a declaration to Apec leaders on the issues we were most concerned about as future leaders, I was nominated by my peers to present our work, which was broadcast live on Russian TV. I spoke about the opportunity for SMEs to transform the economy of the Apec region, and encouraged leaders to support smaller organisations to grow. While the process of writing the declaration was a good one, I doubt Putin ever saw it.

This year feels like the dawn of a new era, in many ways, in digital diplomacy. As Apec chair, Prime Minister Jacinda Ardern will spend time next week with Voices of the Future delegates, receiving their declaration and hearing what matters to them, ahead of her meeting with leaders of the 21 Apec economies.

It is the next generation, after all, who are the biggest stakeholders in the work that Apec is doing.

CEO plea - 'Open border so we can source staff'

CEO plea – ‘Open border so we can source staff’

The tight New Zealand labour market threatens to undermine our post-pandemic economic recovery as skills shortages increase.

It is such a headache for CEOs that a considerable 71 cent of respondents to the Herald survey say sourcing and retaining skilled staff is one of the key issues keeping them awake at night.

Stats NZ data shows the unemployment rate fell from a recent peak of 5.3 per cent in the September 2020 quarter to 4 per cent in the June 2021 quarter.

The situation is exacerbated by the current Covid-related border restrictions.

Some 72 per cent of survey respondents say their business operations have been hindered by the inability to bring essential skilled executives, investors, or workers across the border.

A further 25 per cent have not been affected.

Spark CEO Jolie Hodson says she sees pressure on skills in areas like cyber security, data automation and AI.

Why a tax on wealth is not seen as the answer

Why a tax on wealth is not seen as the answer

The Green party has suggested a wealth tax as a solution to help close the inequality gap between people who own and people who earn. This has been proposed at 1 per cent on net wealth over $1 million and 2 per cent on net wealth over $2m (applying at an individual rather than household level).

The Greens estimate this is likely to raise around $7.9 billion in its first year. Business leaders are not in favour, with a combined 82 per cent of survey respondents saying they do not support the consideration of a wealth tax.

“If we had a properly functioning housing market, the whole question of extremely large increases in personal wealth would largely go away,” said ICBC (NZ) chair Don Brash, a former Reserve Bank Governor. “What is so offensive in the current situation is that most of the huge increases in wealth are not the result of hard work, or of inventing something new, or of building a business but just the result of buying lots of land with borrowed money and waiting.”

Many suggested this form of tax would fail.

Said SkyCity Entertainment director Silvana Schenone, “people who will be caught by this will also be able to restructure their affairs or seek advice to not trigger the wealth tax. Also, wealth inequality should be addressed at the root of the problem, not as a punishment to the wealthier end.

“Wealthy New Zealanders would leave or restructure their affairs,” agreed Devon Funds Management’s Paul Glass.

“All a wealth tax will do is result in people shifting their assets to more desirable jurisdictions,” says an investment company CEO. “We want to attract capital, not send it offshore.”


What can we learn from business?

What can we learn from business?

Education is an issue CEOs care passionately about. “Educating young New Zealanders can have a very positive effect in reducing crime and improving their future and that of New Zealand,” says Mainfreight boss Don Braid.

Over recent years, educational attainment levels at both primary and secondary schools in New Zealand has come under increased scrutiny.

The Herald’s Mood of the Boardroom survey asked business leaders to rate the overall educational fitness of young New Zealanders to play a role in the workforce, on a scale of 1-5 where 1 = not impressive and 5 = very impressive. They gave this a score of 2.76/5.

“The young people that I meet who have been educated at schools across our socio-economic community really impress me,” says a director. “Smart, articulate, world and socially aware. They give me much hope for our country.”

A technology boss shares a similar sentiment: “We can only judge by the people we see in job interviews and the interns we take over summer, and their calibre, enthusiasm and drive to learn and succeed is strong.”

However, multiple international assessments have shown New Zealand students slipping in global educational rankings. “The recent PISA score from testing our 15-year-olds in reading, maths and science was the lowest ever in the OECD, and a similar story occurs in the 2020 TIMSS global comparison,” says chair Craig Stobo. “To then hear the Minister of Education say this year that we should celebrate the achievements of pupils in other countries left me speechless.”

The most recent Trends in International Mathematics and Science Study (TIMSS) saw New Zealand Year 9 students’ scores fall by the largest margins since the study began in 1994. Their maths score fell 11 points to 482 and their science score fell 14 points to 499, on a scale where 500 is the midpoint.

The only certain thing is uncertainty

The only certain thing is uncertainty

Influential law firm boss Hayden Wilson says New Zealand has as a country been very good at adapting to the crisis response to the coronavirus pandemic.

But he warns the post-Covid world is not going to look like it was in 2019 before the virus emerged.

And business should step up and engage with government and support debate on NZ’s future.

Wilson, who chairs Dentons Kensington Swan, reckons we cannot continue to look back and hope for things to go back to the way they were before.

“The only thing that is really certain at the moment is that things are going to continue to be uncertain,” he says. “The real challenge for business is going to be how to adapt to a constantly changing world.”

Wilson, who plays a key role in his firm’s relationships with government agencies, says we should expect the Government to be able to manage uncertainty and communicate how it is dealing with uncertainty well.

“Take for example a date for reopening the borders,” he says. “When you are dealing with a virus that is constantly changing, that we are still learning about, the idea that we can say at this point in time we are going to open the borders defies the science.”

He says we need to be able to have a sensible discussion about what business and government needs, and what the New Zealand community needs to respond to changes — but those discussions are hard because that is not something we are particularly well-equipped to deal with as a community, in the media, or in our political environment. “We have to get comfortable with the fact that this means we’re not going to have certain dates, deadlines and pathways.

“We’ve got to have a broad understanding of what the principles are on which decisions are going to be made, and how we’re going to be engaged with that.”

But business must lean in — not to support the government — but to support that discussion. “But I don’t think we are any better than anyone else in the world at adapting to the slow burn changes that we’re all facing like climate change.”

Even putting climate change to the side, we have big tension points in the New Zealand economy that will require transformational change, and these will all impact business — even if not immediately. “It’s our infrastructure deficit, which obviously affects business directly, but it’s also the state of our education and health systems, housing and housing affordability, which will have a fundamental effect on business long term, but aren’t necessarily seen as a business issue,” says Wilson.

He says we have to take the opportunity to look at how to fix some of those longer-term tensions, especially when you consider the amount of money that’s available to government in terms of Covid recovery.

There is a role for business to engage sensibly in discussions around these tension points, and a role for government to invite that participation in ways that are nuanced and more sophisticated than what we have previously seen in our political debate.

Wilson uses the feebate scheme, designed to promote lower-emissions vehicle sales, as an example.

“The Government made a fairly orthodox change that couldn’t be seen as anything much more than a tinker around the edges, and there has been a massive pile-on, which makes it very difficult to do the incremental things that need to change.”

It will require business taking a role as thought-leaders and engaging with government. “Sensible businesses need to start thinking about how they can take responsibility for being part of the debate,” he says. Of course, for this to happen, Government will need to be receptive to business.

Wilson says that currently, government is not as receptive as it should be to feedback from business.

“Our political environment doesn’t really facilitate that risk-free engagement,” he says. “The media and other political parties treat it as a horse race.”

He says while there are some parts of government that are interested in having these discussions, government departments will need to find a way to unlock risk adverseness where it’s appropriate.

“We need to be much more willing to be open about having discussions in areas where we are looking longer term and planning New Zealand’s response.”

Wilson says the Labour-led Government is run tightly by a small group of senior ministers, in whom the Prime Minister has confidence.

“Some of them are doctrinaire, some are stubborn, some are cautious.”

But, he says we have seen things like the wage subsidy where the approach taken was revolutionary, and gave some insight into what can happen if you have different thinking — “and I think increasingly there will be a push to do that.”