Company level sustainability ambition

The corporate borrowers taking part in the KangaNews Sustainable Finance-Westpac Institutional Bank roundtable explain their individual sustainability aspirations and pathways.

DAVISON What are each of the businesses’ ESG ambitions and the timelines for their targets?

WASHER We just launched our first sustainability-linked loan (SLL), refinancing about A$420 million (US$273.3 million) of our debt facilities. This was born from recycling targets Pact Group looked at three years ago when it came out with its 2025 “end of waste promise”.

Pact has always been very keen to eliminate the nonrecyclable packaging we produce. We chose a target for our SLL of offering 30 per cent average recycled content across our plastic packaging portfolio by 2025. To put this into context, today the figure is only 10 per cent.

Three years ago, Australia and New Zealand lost the ability to send their plastic waste to China so we had to begin building an ecosystem to handle that waste. The target of 30 per cent recycled content is central to this, as is our target of increasing the amount of recycled material we can process and distribute to the external market.

We have partnered with Cleanaway Waste Management, Asahi Beverages and Coca-Cola Europacific to create facilities over the next couple of years that will increase our recycling capacity to 120,000 tonnes of external waste, from 60,000 tonnes. We are trying to bring fundamental change to the industry, and this requires the government, our customers and our partners to have the ambition to make a real step-change in this space.

We also realised there are still some ‘tickets to the game’ in the form of greenhouse gas emissions reduction. We have targeted 50 per cent reduction of our scope-one and scope-two emissions by 2030. We have also covered the people side by targeting a reduction in the gender pay gap.

These key metrics bring our sustainability story together and let us demonstrate our commitment to our people and customers – and therefore to our shareholders and the financial institutions that support us in our strategy.

The ambition is to have a very different world of sustainable packaging in the next 3-4 years. This is very much a part of Pact’s business model but also an ambition we set three years ago to make a difference to our people and our planet.

WONG Our businesses are Cairns Airport and Mackay Airport. Cairns is the gateway to two UNESCO heritage-listed sites: the Great Barrier Reef and the Daintree Rainforest. Sustainability is part of our license to operate, so it is important we respect the environment in which we work and play our part in protecting those assets.

One area we are targeting and are proud to be making tangible progress on is biodiversity. We just executed the first SLL in Australia with a species management target, reflecting the fact that we are in a very unique location, with 350 hectares of mangroves and the opportunity to work with the traditional owners.

There are many opportunities to work in this space. For our SLL, we focused on promoting the recovery of endangered species. We will baseline the population on site, identify three threatened species and then work on species management plans and enhancing the habitat to promote their recovery.

We are really excited about this piece of work, which we will do in cooperation with the Dawul Wuru Aboriginal Corporation – a Cairns-based group that has particular knowledge of local spaces and conditions.

In addition, our sustainability strategy encompasses emissions reduction. We are targeting net zero by 2025 for scope-one and scope-two emissions. Our other targets relate to indigenous engagement through employment and contractor procurement.

DILLANE We probably could have done pure-green use-of-proceeds [UOP] financing three or four years ago because we have a lot of green assets in the form of hydroelectricity.

But we felt doing this on its own would not demonstrate a journey toward sustainability. The starting point for us was when we made a commitment to a science-based target to reduce our emissions based on a 1.5 degree trajectory, which meant reducing our overall emissions by 1.2 million tonnes between 2020 and 2025.

We made this commitment in late 2020 because we felt we had something to demonstrate as meaningful in sustainable finance rather than simply using our green assets and ignoring our less green ones.

We felt the first step was to demonstrate our ambition by having an SLL connected to ambitious targets. One challenge here is that reducing emissions is not just about us: we have to generate power based in part on what our competitors are providing and weather conditions, and these are not factors we control.

Our journey also includes a commitment to renewable generation development, and we have targets for what we are committing to build ourselves or the purchase agreements we sign with other developers of generation. Our target is an extra 1,350 gigawatt hours by the end of 2024 and 2,650 by the end of 2030.

We also included a social target in our SLL, with a KPI about creating pathways for working in some of the communities we operate in. This is very important to our people.

Having ambitious sustainability targets is the only way we can progress on ESG [environmental, social and governance], particularly for companies with fewer green assets. We have green UOP bonds because to a certain extent our investors need them. But having SLLs is the key aspect that allows us to operate in this space.

LAKE In 2013, we released our “this changes everything” strategy about getting to net zero by 2030. At the time, we admitted we had no idea how we were going to do it – because some of the technology we thought would be needed did not yet exist.

Pleasingly, we met the target nine years early. This was made possible in part by improving the efficiency of buildings: Mirvac Group now has an average NABERS rating of 5.3 stars for its investment portfolio including, I believe, 11 buildings rated five or five-and-a-half stars and four with a six-star rating. The newest buildings have been designed to be 100 per cent electric.

We went down the tri-generation path early in the piece as gas was less intensive than the grid. This is now an impediment to our 100 per cent electric target due to the contracts in place.

Our biggest scope-one emission is natural gas, with about 5,000 tonnes of our remaining 7,100 tonnes of emissions. We offset this to reach our net zero target. We also have targets to reduce and recycle waste from our investment and construction businesses along with the goal to be net zero water. We set three fairly big targets, and we are making progress on all of them.

FISCHER Pepper Money was founded more than 22 years ago on the principle of helping customers succeed. As we fund mortgages and other types of secured assets, we have a two-pronged approach with a corporate ESG strategy and the issuance of debt in the capital market. We have a green funding programme and earlier this year undertook our first social RMBS [residential mortgage-backed securities] deal.

From a corporate perspective, we have been working on our ESG strategy and framework, and plan to publish it as part of our yearend process. We have been spending time understanding what international as well as Australian reporting standards will be and in ensuring the targets we set are objective, actionable and – importantly – measurable as we want to ensure transparency in reporting.

ESG is a big focus from the business itself. It is a continuing journey but there is a lot of momentum internally from the company’s staff and from investors. Debt capital markets are driven by investor mandates, and companies that are not addressing ESG will eventually be limited in their ability to access funding.