Deep dive into the nuts and bolts of responsible investing
Aotearoa New Zealand Stewardship Code Director Jackson Rowland attended the recent RIAA conference and reports on his key takeouts from the event.
Panellists from the ‘What does leading practice stewardship really look like?’ session
Stewardship was high on the agenda at the RIAA Conference Aotearoa NZ held in Auckland this September.
Investing leaders and sustainability practitioners gathered to delve into the practicalities of responsible investing and detailed insights, centred around the theme ‘Mā te mahi ka ora. Through work we thrive.’ RIAA Co-CEO, Dean Hegarty, noted “Everywhere we look we’re seeing changes and challenges, new initiatives and opportunities, ideas becoming action. This year's theme highlights the power of collaboration and action to drive meaningful change for a healthy society, environment, and economy.”
New Zealand’s responsible investing thought leaders speaking at the conference included Director of ASB and Founding Chair of New Zealand’s Climate Change Commission Dr Rod Carr, Spark CEO Jolie Hodson, Governance Committee Member of Aotearoa New Zealand Stewardship Code Shayne Walker, Liam Mason from the FMA and RIAA Co-CEOs Dean Hegarty and Estelle Parker.
Welcoming scrutiny
A stewardship panel featuring Paul Chandler (Director of Stewardship at PRI), Rebekah Swan (RI Specialist at Fisher Funds) and Shayne Walker (Managing Partner at Māori Growth Partners) stressed the need to welcome scrutiny to improve stewardship practices and avoid haphazard engagement. The panel acknowledged collaboration can be hard, but it can also reduce the resources required and make us more effective. High quality and meaningful engagements are important because many New Zealand companies have limited investor relations resources, and aligning our conversations can help maximise engagements.
Understanding the theory of change for each engagement also helps stewardship efforts. A theory of change is a practical tool for articulating the outcomes you are trying to achieve and what activities you need to take in place to get there.
We are increasingly seeing investors consider value chains and sectors more broadly as potential engagement targets, and also seeing more sovereign engagement. Spark spoke about how it is regularly asked about its climate change perspective and modern slavery. CEO Jolie Hodson said part of the value investors can add is sharing examples of initiatives they could consider to better manage risks. This knowledge sharing from investors has helped Spark move forward on the issue of modern slavery.
Liam Mason from the FMA spoke about the need for greater clarity and certainty about the information investors are getting. The FMA will be updating its ethical guidance from 2020, following a review of how investors had applied the FMA’s disclosure framework for integrated financial products guidance issued in 2020. The review found examples of confusing, unclear and inconsistent disclosure that may have made it difficult for investors to understand the product or whether ethical claims were being adhered to.
Climate change
With a new government and mandatory climate-related disclosures set in place and significant developments like the Sustainable Finance Taxonomy in the horizon, Dr Rod Carr said the decarbonisation opportunity is in the trillions of dollars, with all of the technologies needed to decarbonise already available. However, Dr Carr said it’s beyond belief that New Zealand is politicising the decarbonisation of ground transport - when that decarbonisation is in the country’s best interests. He pointed out that even if the cost of oil dropped to zero, the cost at the pump would only drop by a third - because the cost of transporting and refining are two thirds of the cost of oil. The economic case for decarbonising transport is clear.
Genuine engagement with iwi
Acknowledging and upholding Te Tiriti o Waitangi is an integral part of the Aotearoa New Zealand perspective on effective stewardship and the conference heard that Māori investors are divesting because of lack of indigenous engagement, highlighting the importance of prioritising genuine engagement with iwi.
There was good advice from speakers, including being clear on why you want to engage with Māori, and understanding and demonstrating the values of the iwi you are working with. Leave egos at the door. Sit alongside, work together. Be humble.
Building trust takes time and engagement should add value to Māori, with some investors asked to report on how they’re positively affecting Māori. Investment decisions by Māori are starting to be considered mokopuna decisions, because they will affect the lives of your grandchildren’s generation.
Final takeouts
Effective stewardship is a crucial tool to create and preserve long-term value for current and future generations. Increasing investor stewardship in New Zealand can strengthen relationships between companies and investors, better manage risks and opportunities, and preserve value in both the company and our economy.