COP26 in review, implications for investing
- COP26 concludes with some progress made but not enough.
- New Zealand updates emissions target and signs methane pledge.
- International carbon credit trading supported through resolving technical provisions in Article 6 of the Paris Agreement.
- Implications for corporates to address climate change risks given greater expected regulation and investor scrutiny in aligning with net zero targets and a 1.5-degree world.
What to expect from COP26
- Country level emissions reduction targets expected to take centre stage to ensure a 1.5 degrees scenario is within reach.
- Carbon trading and ‘leakage’ likely to feature given the adjustment mechanism proposed by the EU.
- Financing the transition will be an important focus, particularly for developing countries that require support.
Sustainability themes from reporting season
- Climate change disclosure is increasingly prevalent
- Diversity and inclusion considerations are growing wider in scope
- The focus on human rights is rising with inaugural modern slavery statements
Social Spotlight II: Human Capital Management (Including video)
- Health and safety, diversity and inequality are key issues related to the United Nation’s Sustainable Development Goals.
- In our second of three articles following our research project, we summarise our findings on health & safety, gender diversity and income inequality.
- We found a lack of injury frequency disclosures, with less than half the companies in our sample reporting on recordable injuries and lost time metrics.
- Gender diversity across total employees is broadly equal, but there is significant room to improve female representation in senior roles.
- Significant variance exists between sectors on our measure of income inequality.
Sustainability-Linked Bonds: Video
In relation to our recent Harbour Navigator, Manager of ESG Research, Jorge Waayman sits down with Senior Credit Analyst, Simon Pannett to discuss sustainability-linked bonds and what that means.READ MORE
Accelerating down the sustainability road(map)
- The inaugural Australasian sustainability-linked bond was issued by Wesfarmers last week
- Sustainability-linked borrowing links a company’s interest payments to measurable sustainability targets
- Missing the targets would result in tangibly higher interest costs
Harbour’s Environmental, Social and Governance policy
Harbour’s Environmental, Social and Governance (ESG) policy encompasses our approach to responsible investing including integration into our investment decision making process, stewardship practices and industry engagement. This policy has now been updated to reflect our constantly evolving approach with key developments such as a new section on sustainability outcomes, our guiding principles on proxy voting and further explanation of our exclusions process.READ MORE
Today's Climate Change Commission release
The key changes from the draft report to the Government are:
- Historic emissions have been revised up – we are at a tougher starting point
- Lower uptake of electric vehicles forecasted
- Revisions lower the estimates of primary sector herd reductions
- Increased ambitions on waste
It’s not easy being green
- The Climate Change Commission’s final advice to the Government is due to be released next Wednesday. This follows a review of interested party submissions and feedback from the initial draft report.
- We do not see the key draft recommendations changing, but at the margin we might see some alterations to the Commission’s recommendations.
REINZ data shines a light
- The housing market holds firm in first read post significant policy changes
- Yesterday’s Real Estate Institute of New Zealand (REINZ) data is the most significant indicator of the housing market since the significant policy changes introduced on 31 March.
- This relatively strong data suggests that it takes both supply and time to cool a housing market
Social Spotlight I: Video
In relation to our first Social Spotlight research installment, Manager, ESG Research, Jorge Waayman sits down with Executive Director, Ainsley McLaren to discuss some of the initial findings.READ MORE
Social Spotlight I: Employee Engagement
- Employee engagement, among larger NZX-listed corporates, was assessed through company reports and a survey.
- We found a low level of disclosure on employee engagement scores, turnover and absenteeism with comparability between companies difficult.
- The majority of companies that did disclose showed improvements in their employee engagement scores and turnover, but not absenteeism.
- Sector dispersion is evident with the IT, Communication and Consumer Staples companies showing the greatest improvement in employee engagement survey
ESG themes from company reporting season
- Health and safety are being prioritised in response to COVID-19
- Companies are broadly improving gender diversity and pay gap disclosure
- There is a rising alignment with climate change reporting framework
ESG & COVID-19 – Did the long term add value in the short term?
- Whilst Environmental, Social and Governance (ESG) policies take time to impact investment returns, we present evidence that ESG policies added value in the volatile first half of 2020
- Companies with better ESG credentials fell by less when the market dropped in the first quarter of 2020 and kept up with the market when it rallied in the second quarter of 2020
- Companies with lower ESG credentials dropped more in the first quarter, recovered less in the second quarter and underperformed the market over the first half of 2020.
Lifting the bonnet: Electric vehicle adoption, or a lack thereof?
- Electric vehicle (EV) adoption, among larger NZX-listed corporates, was assessed through a quantitative and behavioural survey
- There is low EV penetration in company fleets, on average, with significant dispersion between industry sectors
- Reputation benefits are ranked as the most important driver of EV transition
- A lack of suitable EV models is rated as the largest barrier to adoption, even above cost
- A majority of the companies surveyed had immediate plans to invest in more EVs, however this has likely changed in light of COVID-19
Ethical investing: walking the talk
In recent times, perhaps more visibly prior to COVID-19, it has been satisfying to see growing interest in, and demand for, ethical investment products. Ethical is the term most often used by New Zealand investors, whereas fund managers like Harbour use terminology such as “ESG” (Environmental, Social and Governance) and others might refer to “Responsible Investing”.
Taxonomy issues aside, what one investor considers ethi...