Company directors are not as aware of climate change challenges as they should be and risk leaving their firms insufficient time to respond, says Karen Silk, deputy chair of the Sustainable Business Council.
While some firms are taking strong positions, many others are reacting to regulation and tending to do the minimum.
Directors have “a wee way to go” in lifting their understanding, she said. Boards need to recognise that the time horizons for making decisions on strategy have shifted, and understand the potential breadth of impacts and opportunities faced by the businesses they are responsible for.
“They set the tone from the top which drives the culture,” Silk told delegates at the Climate Change and Business Conference in Auckland yesterday. “Given the degree of challenge that we are facing, we actually need to see leaders step up and lead and not manage to that minimum.”
Silk, general manager of commercial, corporate and institutional banking at Westpac New Zealand, was speaking as co-chair of the Sustainable Finance Forum. The forum was established earlier this year to look at ways to adjust the country’s finance system so that it can better fund projects and new technologies needed to reduce emissions and improve environmental sustainability.
Delegates heard several times that finance cannot solve climate change, but can fund the things that will. And new financial products are emerging.
Green bonds are now an established form of funding in New Zealand, with recent issuers including Contact Energy, Auckland Council, Argosy Property and Westpac.
Last month, ANZ made the country’s first sustainability-linked loan, providing $50 million to Synlait Milk for four years. The rate on the loan will fall if Synlait can meet set environmental and social performance goals.
Silk said the level of activity by the finance community in the past year is heartening, but that greater efforts will be required.
The forum aims to provide recommendations to the government by mid-2020 and will be seeking feedback on an interim report it aims to publish by Oct. 31.
But Silk said improved availability of funds for projects will be of little value if firms aren’t acting.
Companies no longer have the luxury of waiting for new technologies to become economic. They need to be acting now.
Silk observed that the country’s first large-scale wind farm – which CentralPower started on the Tararua Ranges in 1996 – was commissioned at a time when the cost of its generation was about twice the prevailing wholesale power price.
“They didn’t do it because it was economic. They did it because they believed that that was the technology of the future and that someone had to stand up and take a chance,” she said.
“We can create all the tools, processes and make the capital available, but until somebody actually wants to use it, this won’t happen.
“It’s a collaboration that’s required. It’s not a one-way, supply-side discussion.”