Turbines at the Te Apiti wind farm. Photo / Supplied
The strength of our pandemic recovery has caught most of us by surprise and we are in a privileged place globally.
While we can't pretend we'll ever fully return to normality, we do need to have a much deeper conversation about how we adapt and grow anew so that our future is better than our past.
There has been a lot of talk about "building back better" but not a lot of detailed discussion about how we approach this with long-term inter-linked outcomes in mind, such as adoption of clean technologies, the health of our people, increased economic value and greater resilience to climate change.
If we are to build anew, the infrastructure investments we are making now cannot be rolled out on a project-by-project basis, or simply prolong past practices. They need to contribute to a clear and coordinated strategy to deliver the sustainable, all-of-society outcomes that are needed. We must also take care that what we build doesn't become a stranded asset, prematurely devalued because of climate change implications, or changing technologies and regulatory environments.
While many other countries still struggle to contain Covid-19, we've held a general election, watched the All Blacks in full stadiums and are looking forward to a relatively normal summer break. While we are still in a recession, Westpac's economists have revised down their peak unemployment forecasts while predicting a solid GDP recovery into 2021. We don't have everything right — the virus still lurks and will for some time yet.
However, we're very fortunate that we can have a national dialogue about our Covid-19 recovery. This recovery planning isn't happening in one place. Households, schools, communities, boardrooms, and government — both local and central — all have roles to play. It all revolves around one key question — how do we build a healthier, sustainable and resilient economy that works for all New Zealanders?
A change of mindset is key, and long-term thinking is at the centre of that. The emergence of a global pandemic has reminded us all that we are an inherent part of the Earth's living systems. We depend entirely on these systems for our survival. We've already pushed many of them to their limits, and in some cases beyond. The results include the climate crisis, loss of some agricultural land to droughts, degradation of ecosystems and a rapidly escalating rate of species extinction.
Humans exist in a narrow environmental niche — we need a particular temperature range to function, certain amounts of rainfall to grow food, clear air and the thriving, bio-diverse ecosystems that make our lives possible. Outside of these limits, we struggle.
During lockdown we saw how nature rebounded when we took some of our pressure off it. It was clear evidence that if we learn how to work with nature, not against it, nature will be more bountiful, and our niche in it more sustainable.
This approach will help us when determining what to build and how. To create that thriving and resilient economy, we will have to shift our focus to productive, sustainable and inclusive systems that nest within the Earth's systems of which we are an inherent part. The Te Ao Māori world view is based on the premise that all living and non-living things are connected and related — "ko ahau te taiao, ko te taiao, ko ahau" (I am the environment and the environment is me). What we build, use and destroy affects other systems and the whole.
Although the time frames of Covid-19 and the climate crisis are very different, the challenges are strikingly similar. They both touch every part of our lives, driving health and inequality problems and threatening the economic and social wellbeing of communities, particularly those less advantaged.
They both demonstrate what can happen when we don't respect the limits of the bigger environmental system of which we are all a part. Importantly, if we approach these crises with the right mindset, our responses could open up opportunities to create long-term sustainable value for future generations.
New infrastructure projects need to be approached with long-term outcomes in mind given the changing operating environment. As climate change, debt levels and inequality continue to press, we need to seek projects that sit in the heart of these challenges. By focussing on the nexus of clean technology, positive health and societal outcomes, increased economic value and resilience to climate change we can succeed. Such projects can create big employment and equity wins. Installing solar panels and batteries on buildings is significantly more job-rich (both in terms of volume and the breadth of skills required) than horizontal infrastructure projects like building roads. If we go further and put solar and energy storage capability into social and community homes, then we create more jobs, reduce carbon emissions, lower energy bills and improve health outcomes for the lowest-income New Zealanders, all at the same time. We could also put solar panels and battery storage on schools and deliver all of the above while also educating the next generation about clean energy and sustainability. Such projects need to contribute to a clear and co-ordinated strategy that aims to deliver the sustainable, all-of-society intergenerational outcomes we're seeking to achieve.
Thus, there are roles for everyone in society as we seize the opportunities to tackle these inter-dependent issues. Consumers, businesses, health and education providers, not-for-profits, civil servants, politicians, children and retirees all have distinctive contributions to make.
To achieve these transformations we need many mechanisms, of which finance is only one. So it is critical we collaborate and plan together. Central and local government can play a key role in providing the right conditions, and business and the finance sector need to engage more fully.
Finance is our speciality at Westpac NZ, which is why we are deeply involved in the Sustainable Finance Forum, led by the Aotearoa Circle of business and government leaders. Today, the Forum releases its final report on "how to green finance and finance green".
At Westpac, we're rapidly increasing the scale and scope of our response by working on a range of strategies, and across most sectors, to help our business customers finance the future economy.
The first is through sustainable finance and an increased focus on socially and environmentally responsible lending. By aligning our balance sheet towards climate change solutions like green buildings, renewable energy and clean transport, we are helping to finance the country's transition to net-zero emissions. We have bigger and bolder sustainable financing commitments in the pipeline.
Secondly, our customers tell us they want tools so they can take action on key social and environmental issues. Our new Westpac Warm Up loan is one way we're helping them with that, by offering an interest-free loan of up to $10,000 to improve the health and energy-efficiency of their home.
Thirdly, as a big business we know we have to set a visible example for others to follow. While there's always more work to be done, this year we became New Zealand's first Toitū carbon-zero accredited bank and set further targets of a 30 per cent reduction in emissions and full transition to an electric vehicle fleet by 2025.
By delivering events such as the Sustainable Finance Summit held today at Westpac, we're bringing together leaders from across the market and corporate landscape including investors, corporate and government-sector entities to discuss how we can collectively plan for a better future through a stronger focus on sustainability and aligning financing with sustainability outcomes.
In Aotearoa New Zealand we are proving to be resilient, adaptable and innovative in the face of a crisis. Now it's time for all of us to turn our attention to other crises. We need to tackle climate change, economic fragility, inequality and social exclusion with the same resilience and energy with which we've worked to contain Covid-19. In all of these tasks, Kiwi businesses have huge roles to play.
How Westpac is financing a more sustainable economy
In August this year, we helped Meridian Energy launch its Green Finance Programme recognising its commitment to, and investment in, renewable energy.
The programme covers all of Meridian's $1.8 billion of debt instruments, including a dedicated pool of eligible wind and hydroelectricity projects and assets.
It has been independently reviewed and verified by DNV GL Business Assurance Australia.
"We recognise the critical role that renewable energy plays in driving decarbonisation of the wider economy," says Meridian's Chief Financial Officer Mike Roan.
"Our Green Finance Programme provides investors with an opportunity to invest in an accredited range of green debt instruments and supports our sustainability efforts."
The programme aligns with Westpac's desire to drive capital towards better societal, environmental and economic outcomes for NZ.
Agreeing one of New Zealand's first sustainability-linked loans, with Contact Energy
Announced in January, the $50 million, four-year sustainability-linked loan facility is one of the first of its kind in New Zealand. Under the agreement, Contact will receive a discounted interest rate on the sustainability-linked loan if it meets ambitious targets linked to its environmental, social and governance (ESG) rating determined by the independent ratings agency RobecoSAM.
Contact Energy's General Manager Financial Services at the time said the loan is "a dynamic tool that rewards and incentivises performance across a range of ESG metrics. It also complements our green borrowing programme, which reflects the low carbon nature of our generation assets."
BloombergNEF data shows the global sustainability-linked loan market grew from $US5b in 2017 to $122b in 2019, and continues to expand.
Joanna Silver is Head of Sustainable Finance, Westpac NZ