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Responsible Investing

Most of the NZX 50 now links top exec pay to ESG

NZ Inc is getting better at carbon and ESG reporting but has yet to reduce greenhouse gas emissions, water consumption and the amount of waste sent to landfill.

Wednesday, December 6th 2023, 7:00AM

by Andrea Malcolm

Forsyth Barr’s second annual carbon and ESG (CESG) review, which rates 58 NZX-listed companies on their policies and practices, shows continued improvement on CESG measurement and data collection but not in outcomes.

The ratings, which don’t assess products and services, are intended to act as CESG due diligence and support Forsyth Barr’s investment research.  The 58 companies covered account for nearly all of NZ’s market capitalisation and contribute about 11% of NZ’s greenhouse gas emissions.

Forsyth Barr head of ESG Katie Beith says while carbon emissions are still increasing, more companies are reporting and setting targets and there was good progress on reporting Scope 3 emissions.

Based on their overall grade, companies are categorised as leaders, fast followers, explorers, and beginners.  The review found that the 11 leading companies now link remuneration of senior executives to improved ESG performance, while in total, 43 companies do so, compared to 33 last year.

Beith says drivers for strong CESG credentials include consumer demand, market and capital access benefits, regulation, climate events and talent attraction and retention.

Easy questions are out

This year 11 companies were rated as leaders with 22 fast followers, 13 explorers and one beginner. This compares to last year when there were 12 leaders, 26 fast followers, 16 explorers and three beginners.

Beith says as sustainability practices have become BAU for most of the companies reviewed, Forsyth Barr has changed its methodology with more focus on analysing actions and outcomes and less on inputs and corporate policies. As a result, the average score has declined. Beith doesn’t anticipate significant changes to the methodology in the future.

“There’s a tension between companies that have been doing CESG for a while and are now tackling the hard stuff compared to those who are starting out and have moved up quickly.”

An easy win would be switching electricity suppliers to a renewable source to cut scope 2 emissions. Harder improvements include reporting on scope 3 emissions which encompass a company’s entire supply chain or setting science-based targets for greenhouse gas reductions.

This year, 18 companies received validation of their emissions reduction targets by the Science Based Targets initiative (SBTi) and three are awaiting approval.

In the E category, measuring and reporting water consumption was the topic companies most pushed back on regarding materiality to their business and so were not measuring. Having said that, data collection has improved, so for example it looks like the amount of waste sent to landfill is increasing but the amount of data has increased, says Beith.

Social metrics saw the most improvement as companies strive to attract and retain talent.

There was no correlation between companies that rated well on CESG and financial performance.

“It’s early days’, " says Beith, “to see whether carbon and ESG ratings translate into share price performance which are very noisy and speculative signals. At the moment it’s a guide to how a company is positioning itself for the long term future.”

The leaders

Meriden Energy (number one for the second year running), Tourism Holdings and Precinct Properties were the top three.

Beith says what differentiates leaders from the rest is their commitments and practices are turning into positive outcomes with eight reporting that their absolute carbon emissions (scope 1 and 2) have come down over the last five years and nine implementing circular economy principles into their businesses.

Most improved sector

The property sector had the most robust increase for CESG scores. Drivers included tenant demand from large organisations wanting green buildings to help fulfil their own carbon targets and options of lower funding costs for green assets. Scores improved for six of the 10 property companies and four went up a category while none fell.

Of all the companies, Delegats improved most, jumping two categories from beginner to fast follower. Others improvers were Property for Industry, Winton, Infratil and Serko. Asset Plus was alone in the beginner category - no move from last year.

Tags: ESG

« Sustainable investment grows down underMostly passive AMP Wealth gets active with climate impact fund »

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.49 7.35
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 6.89 6.75
ASB Bank 8.64 7.39 6.89 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
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Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.35 6.89 6.79
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.95 7.65 7.45
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.15 - -
Co-operative Bank - Owner Occ 8.40 7.35 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.85 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 6.89 6.75
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.39 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.55 7.55
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.79

Last updated: 14 February 2024 1:37pm

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