Everything, all together, all the time
New Zealand is well ahead of the game when it comes to net zero transition in power generation, but many other sectors of its economy still have a long way to go to establish long-term sustainable foundations. Recent climate events, meanwhile, make it very clear that the time for delay has long passed. Speakers
at the KangaNews-Westpac New Zealand Sustainable Finance Summit, which took place in Auckland in November, discussed the critical issues in the context of making sure the next step is action rather than fatigue.
“New Zealand is the second-riskiest country in the world in terms of exposure to losses, after Bangladesh, for climate-related events and earthquakes. And yet we do not have a common definition of hazard risk. Each council decides for itself, often based on affordability rather than need. Is this an acceptable standard for New Zealand?”
“When it comes to community-led retreat, is it the taxpayer’s responsibility to ensure people can continue to go to their bach every second weekend? It is a moral question. If the government’s role is to ensure human rights are met, and that people have a roof over their head and a safe place to live, the focus for any compensation needs to be on primary residences.”
“In a former role, I saw examples where plans from developers were turned down for building consent from a council due to the development being proposed on a flood plain, and the developers then going to the environment court and having the council’s decision overturned. In one situation, the developer then built houses on a flood plain and the development was flooded up to the windowsills in some houses before the project was even finished. Integrated legislation with incentives is needed to support good risk-based decision-making.”
“No matter how fast the world decarbonises, the IPCC says we are locked into almost the same amount of warming through 2040. This means we are going to have to invest in adaptation at the same time as decarbonisation.”
“We are already experiencing some of the impacts of climate change, but we still don’t have a full picture of what the world will look like in 2050 and what the impacts will be by then. Nonetheless, farmers and growers need to be thinking about adapting to the changing climate and seeking opportunities to make their businesses more resilient.”
“It is often said that regulation has driven the sustainability focus in Europe. In my view, this is mistaken – in fact, it is the people of Europe that have driven and influenced change. What I appreciate about the European regulatory landscape is that regulation plays a key role in supporting transparency and clarity, which in turn helps customers make sustainable choices.”
“Nowadays, when most investors look at ESG bonds the first thing they consider is the overall sustainability credentials of the company. This is certainly our approach. For something like a green bond financing climate awareness, we want issuers to have a credible transition plan and capital allocations that are aligned to the plan before we even consider the instrument.”
"Historically, sustainable funds have lots of exclusions in an attempt not to finance adverse impacts. Sometimes, investors assume this means we have low performance or issuers think we are too strict. This is not true. Sustainability risk can create financial risk, and we experience upside on performance.”
“The farming industry must be profitable and keep driving performance as it moves steadily toward a smaller environmental footprint. All farms face similar challenges, but our scale affords us the ability to shoulder risks that ‘family’ farms might not be able to. This opportunity is a real privilege.”
“It has been suggested, including at today’s event, that New Zealand often lacks long-term thinking. I agree. But this is not a problem we have as Māori: we have always held a long-term, intergenerational view. It is not all of society. There are aspects of Aotearoa, in particular the richness of te ao Māori, that we can work with to change the status quo of how we do things.”
“We are a nature-based business: we depend on it and we affect it. The imperative for us to think about nature is really clear and present. Last season, we had more than 20 per cent loss of yield because of the nine weather events that happened. This significantly affects our ability to provide return to our growers and to make investments for the future.”
“Markets discount the future heavily – more so than most individuals and households – to the extent that at a 7 per cent discount rate the value of the future is halved every 10 years. We have to develop an appropriate way of ‘discounting the future’ when we are facing tipping points, cascading effects and irreversible changes. The whole architecture of discounting the future may work well when asking how to value a dollar today versus a dollar tomorrow, but is it the appropriate way to think about a species that might go extinct or the escalating risk, cost and damage of delayed action?”
“We do not have good, consistent and long-term data on New Zealand’s natural capital. It is patchy, a lot of it is held in different places and regional councils do not necessarily collect the same environmental information. Even so, there is a huge opportunity before us. This is New Zealand’s chance to be great – for our world and for our people. So much of our wellbeing and culture is connected to natural capital.”
“While we developed LGFA’s sustainable financing bond framework to align as closely as possible with existing global principles, it was impossible to do so in full. But this is how innovation works, and sustainable finance innovation often comes before standards are formalised to accommodate it. The best example is sustainability-linked bonds: these were issued by European borrowers well before the Principles existed.”
“In New Zealand, the sustainability agenda has been presented in a very narrow way – as being about climate change, environmental degradation and biodiversity. But the existential risks to sustainability are much broader and analysis of the UN Sustainable Development Goals shows we are failing, globally and locally.”
“If a business wants access to international markets – particularly Europe – its sustainability credentials need to be in order. But what this looks like for New Zealand businesses is rarely discussed, and the idea of sustainability credentials as a prerequisite for trade for small- and medium-sized businesses does not get much air time. This is what we are trying to address.”
“The idea that someone from a bank can sit next to someone from another bank who is then sat next to a representative from an airline who is in turn sat next to someone from a farming organisation, and have a conversation about sustainability, is not common in this country. New Zealand needs to be better at sharing vulnerabilities and ideas.”
“I wonder if the future is about ‘less is more’. We are not a big country and we do not need thousands of sustainability panels – but I think we can share better. Sustainability should not be something we need to compete with, it is simply the right thing to do because the next generation needs it. Moving from a competition mindset to a sharing mindset is where the future needs to go.”
“Collaboration is crucial in the sustainability space and several forums allow investors to collaborate in areas such as stewardship. These can be very effective in gathering huge amounts of assets under management around the world and making a case for change. The establishment of the New Zealand stewardship code is an important milestone in this area for the local funds management industry.”
“When leaders are faced with content that is really complex and overwhelming, they need to simplify the process. To do this they have two options: they can either go it alone and be the only one to understand and digest all the elements that fit into sustainability initiatives, or they can harness the power of the collective and do it together.”
“The chief executives of all the major fishing companies all sit on the same board, and we are sharing problems. We are trying to go through the complexity and figure out what it looks like for us to be in existence in 20 years’ time. Sustainability is not individual to each of these companies: it is affecting all of us in the same way.”
“Lots of collaboration goes on in the distribution industry, but often it is not visible from the outside. We are regulated and not competing, so we can readily share about a wide range of subjects – whether it be supporting our people, improving our customer service or how we are tackling environmental issues.”
“Resources are thin on the ground and directors may not have expertise on everything they need to know in the sustainability space. We find ourselves buying in expertise and capability to support the team to make sure everyone is intentionally engaged, excited and pushing for what is needed for the future of sustainability.”
“Sustainability has suddenly become more real to New Zealand in the last 12 months. I think everyone is more focused on listening harder and trying to tackle questions about how to get to the top of the cliff and where money needs to be spent.”
“What if we took 30 per cent of our native bush and made it predator-free by 2030? Or took the 90 per cent of our wetlands that have been destroyed and tried to bring back 20 per cent of them? New Zealand is sixth in the world for marine reserve potential, and we currently have 2 per cent of the total; what if we had a plan to increase this to 30 per cent? Benefits are out there, and they can be achieved in our lifetime.”
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