A glass half full

Climate change is now well embedded as a business risk that deserves boardroom attention.

As we increasingly support our customers with their climate goals, it’s inspiring to work alongside companies that see sustainability not as a risk to be managed, but as an opportunity – and one that can also embrace community and social values.

Climate change has long been recognised as a financial risk. The Reserve Bank of New Zealand (RBNZ) is a member of an international alliance of global central banks focused on, among other things, how to mobilise capital to help the world decarbonise. (At a recent event, the RBNZ stated their view succinctly as, “every year counts, every action counts, every bit of warming counts”.)

The He Pou a Rangi – Climate Change Commission has highlighted the important role of Aotearoa’s financial sector in directing investment to help build a climate-resilient economy and society.

This is a role ASB takes seriously. Our purpose is to “accelerate the financial progress of all New Zealanders” and supporting our customers’ climate and sustainability goals is integral to this.

What this means for each individual business will vary. For example, a customer in the tech sector has identified diversity as one of their key sustainability challenges.

Like most corporates in the financial sector, ASB’s carbon footprint is comprised mostly of the cars we drive, the buildings we run, and air travel. We have targets to reduce our footprint in line with the Paris Agreement goals. Our science-aligned target is a 42% reduction in emissions from FY20 to FY30.

This impact is fairly small though, compared to the impact of our “financed emissions”. When it comes to playing our part in the transition to net zero, we absolutely have to engage with our customers on their own plans to reduce emissions and build resilience.

Different challenges require different solutions. In the farming sector we launched the Rural Sustainability Loan, targeted at supporting on-farm environmental projects.

In the corporate market there has been a growing trend towards sustainability-linked loans (SLL). These require the borrower to commit to key environmental, social and/or governance (ESG) targets, with borrowing costs adjusted based on their performance against these targets.

Hawke’s Bay Airport recently partnered with us on an SLL to continue important work on carbon and waste reduction including a pledge to reach zero emissions by 2030 and progressing a major solar farm next to the runway. The airport’s vision doesn’t stop at climate change with a focus also on the community and how it can contribute to local biodiversity initiatives.

Not all businesses are at the same stage of the journey. An innovation we developed is the sustainable transition loan, designed to assist larger business clients to embed a robust sustainability strategy.

We recently worked with Craigmore Sustainables, one of New Zealand’s largest diversified farm management companies, with a loan of nearly $80 million. Craigmore is targeting its emissions footprint but is equally focused on delivering more equitable social outcomes for rural communities through development, training, job creation, and working with mana whenua.

Guidance and advice is an important part of the banking relationship. As our customers’ climate change and sustainability plans become business as usual, our bankers’ knowledge and toolkit also needs to evolve.

Sustainability will only become more critical for businesses, and for ASB. It’s exciting to be there to support our customers’ journey, and the New Zealand economy more broadly, to becoming more resilient, and fit for the low-carbon future.