Breadth, urgency and accountability in New Zealand’s sustainable finance story

The KangaNews-Westpac New Zealand Sustainable Finance Summit, which took place in Auckland in November 2024, featured the event’s most ambitious and wide-reaching agenda. Speakers discussed the urgent need to act on climate, nature and social challenges, how to do so while navigating the increasingly complex world of regulation and disclosure, and why it is critical to maintain the highest possible ambition.

“We genuinely believe, despite the massive effort, that climate disclosure and the climate change strategy that sits behind it delivers strategic and commercial value. I strongly encourage investors to take the time to digest the reports many businesses have taken a long time to pull together so they can understand the context and insights they provide.”

“The fundamentals of ESG haven’t changed. Bad things happening to people is almost always bad for business – maybe not today or even tomorrow, but definitely the day after. Long-term investors, including banks, tend to lend for more than just a year, which means we need to consider long-term risks that affect our customers’ viability. It is just risk management.”

“I believe it is harder being a sovereign issuer of green bonds than a corporate issuer because we have less certainty over political decisions than a corporate might have over a long-term plan it can execute on its own. But we have a ‘green halo’ effect as a nation that we can tap in to. The challenge is going to be, as the rigour of scrutiny increases, how do we stack up?”

“Our energy sector needs about NZ$60 billion for transition. The gentailers are 51 per cent government-owned and it is not possible to find NZ$60 billion on the government balance sheet. Some of the money is in New Zealand but it is hard to get to NZ$60 billion with NZ$200 million cheques – and only so many entities in New Zealand can even offer this. They will have to go offshore.”

“In the early years, it was very much every person or every iwi for themselves, but in the last decade there has been a real proliferation of collectives. Most iwi balance sheets are quite small – other than the likes of Waikato-Tainui, Ngāi Tahu and Ngāti Whāita, most of them are around NZ$100-200 million if they are lucky. In order to access investments in scale, they must collectivise.”

“We basically need to take every machine that runs on fossil fuels and replace it with one that runs on renewables. Plus we need to build enough renewables to power these machines, as well as additional demand from AI and population growth. This is a remarkable challenge or, as I would prefer to think, an amazing investment opportunity.”

“More than half the world’s GDP is moderately or highly dependent on natural capital. For New Zealand’s export earnings, the equivalent figure is 70 per cent. The sad news is that our natural capital is in a degraded state, and in many areas it is continuing to decline.”

“It became obvious to us around 2020 that displacing jet fuel is an energy play – we just need a different source of energy to fuel the planes. What this is going to be is becoming clearer as the technology evolves. We do not think it will be electric planes beyond the 9-11 seater range. Green hydrogen is a possibility for up to 150-seater sized planes.”

“Use of proceeds bonds issuance was actually quite strong globally in 2024, with about US$1 trillion equivalent in issuance. Local developments are improving the pathway to supply, too. One is climate reporting creating more opportunities for issuers. The other is the consultation process the FMA has been going through to determine how it can remove barriers to issuance of sustainable bonds.”

“A range of analysis indicates that those that have been doing sustainable finance disclosure for the longest are the ones that now have the most robust transition planning and are doing the best reporting. I expect the same thing will emerge with new disclosures as it has with the early adopters of sustainable finance frameworks.”

“I think of nature as a bit like money: each year, we have a budget of natural resources that provide us with the opportunity to build roads, make food and produce products. Until the 1970s, we were doing okay at staying within that budget each year. From then on, we started to use up or blow the budget before the year was through. That day is called Earth Overshoot Day – and it happened on 1 August this year.”

“The focus seems to be trying to create a nice, tight little package of biodiversity, to quantify it and create a unit out of it – not too dissimilar to the methodology of carbon credits. But biodiversity by its nature is very diverse and this task is not easy – as evidenced by the time it has taken to try to figure it out. The approach we are taking might be reconsidered because there is a risk that we end up commodifying nature, which I don’t think anyone intends to do.”

EAMON NATHAN RECONNECTING NORTHLAND

“While TNFD is not compulsory yet, we have realised that the focus on nature is increasing rapidly so we are trying to get the foundations set up for it. At the same time, we also acknowledge that disclosure is not the ultimate outcome: it is the process we take to understand our bank’s risks and opportunities. This is where the value is.”

“What I have learned about what it takes for us to value terrestrial ecosystems is that we may need to experience a major disruption in order to confront the challenges in the marine environment. I’d like to believe that what we are experiencing in the Hauraki Gulf would be this disruption, but the evidence that we are using it as an opportunity to change behaviour is not there.”

ABBIE REYNOLDS NATURE CONSERVANCY

“Blue bonds are completed in the same way as our green bonds issued under the NIB Environmental Bond Framework, which follow the Green Bond Principles. These include a process, criteria or categories on water protections – or, in our case, water management and protection – separation of funds to ensure
the money being received goes out to these projects and, finally, impact reporting – which is very important for investors.”

JENS HELLERUP NORDIC INVESTMENT BANK

“We are already pulling out a lot of value from a highly degraded ecosystem. If we restored it, there is
an opportunity to uplift economic value. In other words, conservation isn’t just for its own sake or even to protect the current value of NZ$5.1 billion a year we generate from the gulf – it can also build it further.”

“Our ocean has the most diverse fauna and flora globally. There are 1,500 species of seaweed, for example, which have the potential to be used for anything from alternative proteins to alternative packaging materials or fibres. The science community in New Zealand believes that the NZ$2.5 billion total contribution of our bio-based blue economy activities to GDP today can be increased to NZ$10 billion, probably within a decade. It will take a lot of ambition and investment, though.”

“It is completely unacceptable that we have families and people in this country living in inadequate, temporary accommodation or, from a demographic perspective, that an entire generation of New Zealanders is almost giving up on the Kiwi dream of owning a home. The government asking the private sector to step up is great, but the growth points are relatively smaller than the total scale of the problem we are trying to solve.”

“There is an opportunity to convert existing buildings to apartments. What we are witnessing – that is really exciting and sometimes misunderstood – is that green rating tools reward reduced use of new construction materials. This makes reuse of existing buildings gold dust, because they require much less use of embodied carbon.”

“The bigger picture in New Zealand is that around 3.8 per cent of our housing stock is socially affordable – this equates to about 84,000 homes at the moment in the middle social housing space. This is really low. The average for the OECD is around 7 per cent – so we need to double our number.”

“Progressive ownership models sit in the space between market rental and market ownership. They help people own part of a home but still enjoy all the benefits of home ownership. We have observed a lot of progress in lending in areas where the land is not available as security. By understanding the risk, and thereby the opportunity, we are able to lend on the security value of the lease but not take the land as security.”

“Corporates are unnerved by the threat of criticism or litigation over their sustainability goals. At the same time, companies’ capabilities – to understand exactly what they are doing in the ESG space, and talk about it in a more careful and nuanced way – are increasing significantly. But the risk remains that the threat of criticism hampers their ambition.”

“To make green finance work commercially in New Zealand, we need to make sure we are in line with government strategies. In this context, there is obviously a significant reset going on at the moment. We are hopeful that the outcome will outline some clear pathways to get on and deliver, because there is a huge cost attached to doing nothing.”

“We have had a strategic focus on physical risk and resilience, and have been working very closely with our members on this in the last 12 months. The reality is that the importance of mitigation hasn’t gone away, but the physical manifestation of climate risk is upon us. Very serious consequences associated with climate change are already built into the system as a result of the emissions we have had to date.”

DUNCAN PATERSON INVESTOR GROUP ON CLIMATE CHANGE

“What concerns me about climate-related disclosures is that some management teams may have taken their eye off the ball of emissions reduction in order to get the disclosures right. I would rather the balance was the other way around: do the climate-related disclosures, but make sure focus is primarily on what can be done to reduce emissions.”

“The US will not be as committed on sustainability issues but a lot of sustainability investment will still go into the US just because of economics. For instance, Texas does not have many Greenpeace representatives but it is big on renewables purely because the economics of wind and solar make it uneconomic to invest in new coal generation. These economics, with or without government funding, are likely to continue and even accelerate.”

“The taxonomy is an opportunity for New Zealand. We don’t need to lead all the time on everything. But with agriculture and forestry, while we want to be aligned methodologically with Australia, we also have an opportunity to take a leadership position, especially on adaptation and resilience.”

“Aotearoa was the first country in the world to mandate climate-related disclosures. This has been quite a challenge across organisations – even those with sustainability teams – to upskill, engage and get ready for the disclosures. But leading businesses in the space are transcending the challenges from compliance into leadership.”

“We have made a lot of progress on our agenda over the last two-and-a-half years because government and financial institutions are pulling in the same direction. We don’t know how this will play out in the context of an Australian election in early 2025, but what will remain is the importance of organisations like ASFI and Centre for Sustainable Finance: Toitū Tahua, and the collective leadership our organisations cultivate and foster. This is needed for long-term progress on our agenda.”

KRISTY GRAHAM AUSTRALIAN SUSTAINABLE FINANCE INSTITUTE

“One observation about the climate-related disclosures I have read is that the leaders in this space are the ones whose climate-related disclosures really reflect organisational strategy and what they are already doing in the space. People like us – observers and investors – can see there is an organic representation of an organisational strategy that aligns with recognition of the need for transition.”

“Investors love additionality because it highlights a potential transition path for issuers. It can be difficult to the extent that an issuer doesn’t want to have the risk of a requirement to spend bond proceeds within a certain time frame, such as 24 months. But it has been done by the likes of Goodman and the LGFA – and I believe this is a really positive development.”

“For New Zealand – based on reading through a lot of other companies’ first disclosures – it feels like we are at something of a crossroads. Is climate reporting going to be a compliance exercise, or is it going to be something that really gets embedded into strategic thinking and informs business strategy in a fundamental way?”

“Battery storage has become a huge focus of investors globally and Australia is at the cutting edge. We expect 7 gigawatts of new battery storage to go live in the next couple of years – which is three times the capacity of our largest coal-fired power station and thus very significant. It sucks up solar generation during the day then puts it back into the grid in the evening, when households come home and there is higher demand.”

TIM NELSON IBERDROLA AUSTRALIA

“Our primary consideration is having access to capital. Having the green label is only going to help. It is hard to define how much, but this is why it is essential for us to keep rolling out our strategy of decarbonisation. The green label totally aligns with our strategy, so it all links together very nicely.”

“What we have learned over time, when we ask investors what is important to them, is that it is all about transition. Investors are not really worried about whether or not bonds are labelled green, but rather what we are doing. On the other hand, when I then ask if we should just take the green label off, they say to leave it there – it is part of the overall story.”

“About 95 per cent of queries about our sustainable finance programme have been from offshore investors. But while there is a lot more demand offshore, I believe there is a lot of potential in New Zealand. We have more direct engagement with our domestic investors and can work more collaboratively to structure products they are comfortable with."

“I am told that, at a recent Chapter Zero climate governance forum, not quite half of board members were confident or very confident in their board’s ability to manage climate change while the remainder felt neutral or not confident. It is safe to say we need to get these numbers up.”

“By prioritising nature, understanding risks, leveraging innovation and fostering collaboration, we can unlock value across sectors and drive meaningful progress, build resilience and create long-term sustainable growth. The focus is on turning challenges into opportunities and empowering leaders to make impactful, actionable decisions for  a more sustainable future.”

“No social change happens linearly. None of us should be surprised that we lean forward, step backward and then go forward again. Don’t get too depressed about this – it is inevitable. The more important question for New Zealand is what happens if there is a general weakening in global commitments not just to targets but to action.”

“One thing we all need to keep in mind is that the climate is going to change whether or not we vote for it. This is not a political choice or a popular sentiment. It is the reality of the climate sciences that we know the climate is changing. We know what the causes are and actually we largely know what we need to do about it. None of this is going to change.”

ROD CARR CLIMATE CHANGE COMMISSION

“The big focus is on values. We can be quite cynical about this because it is an easy thing to say but hard to do. But I believe spending time on values creates a pathway to the future: we have to be good citizens, good humans and good corporate citizens in order to create a sustainable world for the future.”

“One of the ways to get to directors who are not converted is to shift the discussion, for example from conversations on impact – which can be a bit nebulous – to dependency, which speaks to risk for people. Doing this asks directors to articulate what the dependencies are, particularly in the nature space, which is really helpful as it gives an inverse picture of impact. The dependency space is a risk space, where directors should be comfortable.”