NZX companies rated on carbon and ESG

With the final climate standards released this week, New Zealand listed companies are tracking behind carbon targets but are well positioned for next year’s carbon disclosure legislation according to a new Carbon and ESG ratings report.

Tuesday, December 20th 2022, 7:27AM

by Andrea Malcolm

Wealth management firm Forsyth Barr reviewed 57 NZX-listed businesses including Air New Zealand, Meridian and Spark, scoring each company on its carbon, environmental, social and governance commitments, policies and practices. The review did not cover products and services.

Carbon was separated from the ESG framework due to carbon emissions and disclosures becoming high priority. Forsyth Barr head of ESG Katie Beith, says the aim was to get insights into how New Zealand Inc is positioning itself for a low carbon, sustainable future.

Based on their overall grade, companies were categorised as Leaders, Fast Followers, Explorers, and Beginners. Twelve companies emerged as Leaders, 26 as Fast Followers, 16 as Explorers and there were three beginners.

Leaders included outperform rated model portfolio stocks Spark, Precinct Properties, KMD Brands and Summerset Group. Outperform-rated Fast Followers included Arvida, Sanford and Mainfreight.

Companies noted for CESG practices included KMD Brands’ Kathmandu division for becoming certified B Corp, Tourism Holdings for committing to align operations with the Future-Fit Business benchmark, The Warehouse Group for having clearly defined emissions management policies and robust reporting, and Genesis Energy for adding a significant sustainability component into its executive long term incentive scheme.

The utilities, consumer, infrastructure, aged care, health care and industrial sectors achieved above the overall average CESG score, while agriculture, financials and technology were below. Those lagging were generally hurt by lack of historical and environmental data.

Research included published information, Forsyth Barr inhouse knowledge, and data provided by the companies.

The three lowest scoring, Delegat’s, Asset Plus and Winton (which recently listed) didn’t provide ESG data and there was little publicly available.They all said they are working through sustainability strategies.

Beith says, “There are reasons why some are at the beginning of the journey compared to the leaders. They may be smaller, they may be recently listed, or are part of a low emissions industry.”

She says most companies are well positioned to meet the upcoming legislated carbon disclosures. “Half have been disclosing carbon metrics for years if not decades. Of those, around half are reducing emissions. All but 14 have set a carbon reduction target.” She says, importantly, actual carbon emissions for most of the Leaders are trending down over a five-year period. This is no doubt helped by the impact of Covid-19 but is a strong differentiator from the Beginners.

For the E (environment) rating, the level of disclosure policies and practices regarding waste and water – typical environmental performance indicators – was disappointing, says Beith.

“Access to water, water discharges and quality is becoming a significant issue in New Zealand. We would expect more companies to be transparent on water issues. Some listed companies appeared unaware of why reporting use of water or risks around water should be standard practice.” On the other hand, most companies showed progress on circular economy and biodiversity policies and practices.

On social impact, most companies had policies on health and safety, supply chain issues and community involvement. Governance, which was given the highest weighting of importance (40%) of the four areas of the scorecard, also had the highest performance.

Beith says it is exciting to get a benchmark and to compare where companies will be on the CESG report which will occur each year. She is optimistic that there will be good progress.

“There is a lot of movement and things are going to move very quickly. The value in this report is that we’ll be able to monitor and measure progress over time.”

Tags: ESG