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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Finalist: Kathmandu

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

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

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

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

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

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

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

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

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

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

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

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

Finalist: Vector

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

It owns and operates networks which span the Auckland region.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sustainability is a necessity now

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: Hi-tech contact-tracing in favour (NZ Herald)

More can be done to minimise the economic impact of Covid, writes Tim McCready

Some 91 per cent of executives responding to the Herald’s CEOs survey want greater emphasis on intensive contact tracing using best-in-class technological capabilities.

The CEOs also want New Zealand to establish secure airbridges with other nations such as China, Taiwan and Australia — so long as we their response is also under control.

“Air bridges should be considered only when Covid-19 is truly under control and contact tracing technology is truly best in class and traces beyond the border,” says a dairy chief executive.

An experienced chairperson reckons that many — particularly older people — will want to resume international travel as soon as possible. “It should be possible on a user pays basis to allow technology-enabled devices (such as ankle bracelets) to allow returning residents and citizens to quarantine in their own homes on return from overseas.”

Public-private partnerships

There is high support — 78 per cent — for public-private partnerships (PPP) for quarantine facilities where essential workers can be quarantined at their company’s cost. PPP isolation facilities for international education students were backed by 75 per cent of respondents; a much higher level of support than PPP isolation facilities for international tourists — only 48 per cent of respondents said that should be a focus.

“The tourist isolation facility idea is similarly impracticable because tourists are unlikely to want to come to NZ and stay in such a facility for 14 days at their expense (not much of a holiday),” says a legal firm boss. “Isolation facilities for students sound good in theory but the numbers involved would make this impracticable.”

Some questioned NZ’s reliance on export education as an economic driver.

“How much was international education just a feeder to the incredibly high immigration levels over the past ten years?,” asks a property boss.

“I really think we have to critically examine this sector’s contribution — painful as that might be.”

A lobbyist believes PPPs would alleviate some of the constraints around capacity.

“Our Ministry of Health isn’t up to handling this pandemic, they have dropped the ball so many times and are very economical with the truth. A future inquiry will not be pretty for some who we rate very highly now.”

Beca Group CEO Greg Lowe emphasised the pandemic is not a short-term problem, calling for a “smart” approach to a safe border. “The Prime Minister called for ‘the smartest border in the world’ early in the crisis but we are not seeing much progress towards this,” he says.

“We have three problems currently: getting an effective system of border control robustly in place, getting a contact tracing system in place that uses technology not people to capture contact data, and developing a plan that increases safe border processing capacity.”

“Maybe we can build world-class Covid management businesses out of this,” suggests Precinct Properties chair Craig Stobo.

Others differ.

“Government-run facilities have had their challenges, and they’re just the issues you get when you need tens of thousands of people to follow processes where, if it goes wrong, people die,” says a real estate boss. “Add the inherent risk of lots of people and processes to a profit motive and I just can’t see the Melbourne situation not happening again.”

Opening the door to new industries

The Covid-19 crisis has had a severe impact on two of New Zealand’s leading service export industries: international tourism and education.

Professional director Pip Greenwood says “now is the time to leverage NZ’s attractiveness as a place to live and work to attract investment.”

CEOs were asked what alternate areas New Zealand should look to increase investment in.

Agritech is the most promising area say NZ’s top executives. A fund manager says Covid could allow New Zealand to “double down” on its premium food producing status. “Move up the quality/pricing curve to drive greater yields from our premium products and sell direct to consumers via digital gateways.

Technologically-led businesses were also supported.

Spark CEO Jolie Hodson says rather than making big bets behind a small few we should be investing in building the capability, productivity and effectiveness of all businesses. “Particularly small and medium-sized businesses who would benefit significantly from going digital,” she says.

Decarbonisation of the economy and the development of a green hydrogen industry received 3.62/5 and 3.54/5, respectively. New forms of public transport such as electric planes, received a score of 3.07/5.

The latter was the top pick for Green co-leader James Shaw at the recent BusinessNZ election conference.

He said there were NZ companies doing this, including those involved with the America’s Cup.

“We do have a niche industry that is starting to emerge here, which I would like to see grow.”

“Our biggest opportunity for decarbonisation is electric vehicles. We have enough consented and existing generation to power the nation’s vehicular fleet at circa 30c per litre,” says one professional director.

“What has happened to Helen Clark’s ‘knowledge economy’?” asks Beca Group’s CEO Greg Lowe.

“Development of alternative transport solutions, the potential of alternative fuels like hydrogen to provide a new export market, export of digital solutions and services — we should be working to build a stronger national plan to advance all of them.”

But respondents caution New Zealand not be too quick to write off our traditional export earners.

One said that realism is important in this situation, noting that tourism and export education will return.

“There is no real strategy to transform the economy either from a production perspective or around decarbonisation — it’s all hopes and dreams stuff currently.”

Capital Markets: Lessons and trends from the pandemic (NZ Herald)

We’ll be feeling the impact of Covid-19 for  a long time to come, in many different ways

Covid-19 has shaken capital markets globally, and the long-term impact will not be known for a long time.

Disruptive events tend to accelerate trends that are already in place, and Covid-19 will bring wide-ranging implications and deliver lessons into the future for organisations and individuals within the capital markets sector. Here’s some to chew on:

Digitisation, automation and cybersecurity

The most visible trend accelerated by Covid-19 is the leap forward in the digitisation of the economy. Westpac chief economist Dominick Stephens says there will be no going back: “that may be the last straw for some firms and a huge opportunity for others, but digitisation is a positive for the economy overall.”

Digitisation has long been mooted as a mega trend that will disrupt the capital markets sector, but the pandemic has necessitated a swift response. The past several months have exposed the requirement for firms to make a large number of decisions with increased speed and agility. Many expect the disruption to force firms in the capital markets sector to look at new operating models that are more automated and increasingly data-driven to address revenue challenges and drive down costs. This will include leveraging artificial intelligence, the cloud, machine learning and analytics to drive efficiency, improve productivity and improve competitiveness.

Increased competition from fintech firms has been eating away the market share from traditional players. Prior to Covid-19, industry giants in the capital markets were making moves to acquire and collaborate with fintech start-ups. This is expected to continue at pace, as they acknowledge openly the need for innovation to bolster their capability and agility.

However, the rapid digital transformation and changes in the way business is conducted has also brought with it a significant increase in fraudulent activity which will ensure cybersecurity remains an important consideration for capital markets. Cybersecurity firm McAfee’s quarterly report says there has been a surge of cybercrime exploiting the pandemic through Covid-19 themed malicious apps, phishing campaigns and malware. The US Federal Bureau of Investigation said it had received as many cyber-attack reports by the second week of June as it had in all of 2019.

Impacts on people, ways of working and the gender pay gap

The pandemic changed the way employees around the world worked and engaged with their workplaces and proved that remote and flexible working is possible — even in capital markets where some firms have been reluctant to embrace the trend. While most workers in New Zealand have now returned to their workplaces, many agree there were values that became more pronounced during lockdown that we should try to hold on to. Organisations are now considering how they can be more flexible, agile and have a heightened awareness of employee wellbeing. At the same time, they want to ensure that the quality of work and productivity remains high.

A recent EY article questions whether this flexibility, reprioritisation of goals and consideration of what is important could help to close the gender pay gap. Firms in the capital markets are continuing to face requirements to become more diverse. In Europe, France is demanding a 40 per cent quota of women on boards. The UK has had more than 350 financial services firms sign up to the UK Government’s Women in Finance charter, where they set targets for gender diversity. But despite this, the World Economic Forum’s Global Gender Gap Report 2020 revealed that gender parity will not be attained for 100 years.

EY notes the “wholesale levelling of the playing field” has the potential to challenge HR, talent and recruitment and lower long-standing barriers including those for parents with children or those with other caring responsibilities.

Cashless society edges ever closer

The arrival of a cashless society has been long-anticipated, but the events of this year have no doubt accelerated its arrival. Kiwis have embraced mobility and connectivity, and Covid-19 has seen us become more comfortable with e-commerce, Auckland Transport go cashless, and many stores encouraging cashless payment for hygiene reasons — with the contactless eftpos limit temporarily raised from $80 to $200.

The Bank for International Settlements released a bulletin in April, noting that Covid-19 has fanned public health concerns around the use of cash. It said that looking ahead, developments could speed up the adoption of digital payments around the world, including central bank digital currencies.

In China, digital payment platforms are already widespread, including Alibaba’s Alipay and Tencent’s WeChat Pay — so much so that in many stores cash is not accepted. Taking this a step further, China is launching a pilot programme of its digital yuan in four major cities. The currency is backed by China’s central bank, the People’s Bank of China, and is pegged to the national currency. Commentators say the objective of the digital yuan is to increase its circulation and become a global currency like the US dollar, and that the timing of the launch — when the rest of the world is dealing with the global pandemic — provides China with an unusual opportunity to beat private competitors such as Facebook’s Libra currency.

Surge in sustainable investing

During lockdown, many appreciated the return of birdsong to inner-city neighbourhoods and the quiet that came from the severely reduced traffic. Satellites mapping air pollution revealed a significant drop in nitrogen dioxide concentrations across Europe and China, coinciding with the strict quarantine measures.

Analysts are predicting Covid-19 to be a major turning point for ESG investing, or strategies that consider environmental, social and governance performance as increasingly important alongside financial metrics. The pandemic has highlighted how connected humans and society are to nature, plainly demonstrating how a fracture in one part of the ecosystem can compromise the entire system.

A survey of 50 global institutions by J.P. Morgan, representing US$12.9 trillion in assets under management, asked how they expect Covid-19 to impact the future of ESG investing. Some 71 per cent of respondents say it was “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.