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Road to Zero

Road to zero – Domenic Capomolla

Interim CEO, Pacific Hydro Australia

Macro overview and factors to consider:

- Actions to undertake without stressing your P&L and Balance Sheet

- The value proposition for your employees

- Lenders are pulling funding on corporations with no clear zero commitment plan

- Who in the market place can help you?

- How renewables are part of the solution

 

Macro overview and factors to consider:

The Australian government confirmed it will work towards achieving net zero by 2050.

The latest Intergovernmental Panel on Climate Change (IPCC) report earlier in March has ranked Australia as the worst climate performer out of all developed countries.

Changes in production (supply chain, logistics, commodity prices) and consumption trends (rising costs, the ‘conscious consumer’), as well as structural economic changes (eg shift from manufacturing/industrial to services) are driving industry to adopt earlier net zero targets.

Many of our customers, employees and other key stakeholders have increasing expectations around ESG performance, and specifically, commitments to addressing our own impacts on climate change.

This is where most of us find ourselves today, but without a clear roadmap of what needs to be done, or how to go about it.

 

Actions to undertake without stressing your P&L and Balance Sheet:

An ESG agenda that is integrated with your overall strategy and market positioning will create and sustain competitive advantage, not place stress on your balance sheet.

It sounds counter-productive, but reducing emissions generally improves bottom line – efficiency reduces operating costs and increases employee productivity.

You can’t manage what you can’t measure, so if you’re not already tracing your emissions, start doing so.

Activities to consider:

- Energy consumption
- Equipment purchase/use
- Waste generation and disposal
- Travel

Key principles:

- What can you avoid? Eg travel, automatic switch-off of equipment when not in use
- What can you reduce? Eg replace laptops / equipment with high-efficiency products
- What can you switch? Eg sign PPA for renewable energy

Changes can be approached through the lens of cost and efficiency; organisations will likely already be regularly reviewing their purchasing and operational activities, so build in considerations around emissions.

 

The value proposition for your employees:

Boston Consulting Group recently undertook a survey of 1000 Australian employees:

- One third of respondents say that ESG (environment, social, governance) performance is a reason to recommend their organisation as an employer.
- 70% of respondents said that it was important or very important for Australian organisations to focus on ESG activities.
- In general, Australian’s care about social and environmental issues, and expect their employers to take these issues seriously.
- “The economic disruption that will be created through the shift to a decarbonized, more sustainable and climate-resilient economy will provide opportunities for many organisations but cause significant disruption for others.” - report

This pandemic has highlighted an increased need for an alignment of individual and organisational values – which in part helped trigger the “Great Resignation” we’re now witnessing.

A recent survey by Deloitte showed that climate change / protecting the environment ranked second-highest of top concerns for Australians millennials and Gen Z, being only recently replaced by ‘unemployment’ concerns. As these generational groups increase their representation in our organisations, and as consumers, this highlights a need for action

 

Lenders are pulling funding on corporations with no clear zero commitment plan:

Banks and other financial institutions are under increasingly intense pressure from institutional investors and NGOs to ‘green’ their loan and bond portfolios.

ESG considerations are becoming far more prevalent in loan markets, with green financing products increasing – sustainability-linked loans, green loans, green bonds. Considering the increasing focus on ESG issues, locally and globally, adoption of green finance will likely continue to grow.

When done properly, green finance has benefits for corporate borrowers – aside from the obvious one of incentivizing improved ESG outcomes, green products can offer lower pricing, increased access to capital and reputational advantages.

All of Australia’s major banks have committed to net zero by 2050, and to the climate goals of the Paris Agreement.

The Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) directed financial institutions to better consider the financial risks of climate change and international shifts away from climate change.

The EY 2021 Global Institutional Investor Survey found that the Covid-19 pandemic has catalyzed the importance of climate change, with investors making the climate crisis and the energy transition central to their investment decision-making processes.

 

Who in the market place can help you?

For many organisations, energy consumption is one of their largest contributors to emissions – and costs. Pacific Hydro Australia has C&I offerings and market-leading, competitive PPAs.

Beyond that, making a commitment to net zero goes deep into your organisations.

 

How renewables are part of the solution:

For countries, local, state and federal governments, large energy consumers, businesses etc, to achieve net zero, we need new technology to meet these goals, and also address barriers to the deployment of those technologies.

Australia remains hindered by a lack of regulatory clarity and clear climate policy at a federal level. However, Australia is emerging as a leading PPA market, which are a key driver of clean energy investment – they provide organisations the ability to demonstrate their green credentials while providing developers the ability to secure financing and create viable new projects.

Pacific Hydro Australia are finalising its own net zero plan with its ESG strategy. Each year, our operations avoid over 1.6 million tonnes of C02 emissions.

 

Links to references:

- Boston Consulting Group Australian Employee Perspective on ESG Report

- Deloitte Global 2021 Millennial Survey

- SMH – Big banks and super funds to face climate change risk checks

- EY 2021 Global Institutional Investor Survey

 

Contact us

If you're interested in finding out more about your organisation's Road to Zero, please contact us at concierge@mentorlist.com and we can arrange a call with Domenic.

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