Against the backdrop of a global health issue affecting the planet and climate change being declared as a national emergency, New Zealand’s largest listed companies ramped up their environmental, social and governance (ESG) reporting in 2020.
Prior to the arrival of COVID-19, there was already a tail wind pressing for greater corporate disclosure and responsibility.
Extreme weather events such as golf ball-sized hail in Timaru and expansive bush fires in Australia and the United States have focused public and investor minds on climate change.
The pandemic, plunging oil prices, and social demonstrations on inequality all contributed in 2020 to the accelerating interest in greater corporate disclosure, transparency and responsible investing.
The joint NZX and Wright Communications Environment Social and Governance (ESG) Report 2020 examines the most recent annual reports and sustainability reports of the S&P NZX50 companies and includes case studies of public companies such as Contact Energy and Port of Tauranga as well as a case study on ASB Bank’s Positive Impact Fund.
Overall, the level of ESG reporting and usage of international reporting frameworks among the S&P NZX50 increased in 2020, with more companies using the Global Reporting Initiative, Integrated Reporting and Taskforce for Climate-related Financial Disclosures (TCFD) frameworks or guidelines.
Two reporting methodologies gained traction in 2020 – Integrated Reporting use was up 160 per cent, and TCFD which moved from zero interest in 2019 to 14 reports with TCFD content of varying levels in 2020.
NZX Limited CEO Mark Peterson says it is encouraging to see more and more New Zealand companies moving to disclose and discuss their approach to sustainability and consistently report on how they are addressing ESG risks and opportunities.
“What has really stood out for me this year is the way we have worked together. Across the breadth of different sectors, we have drawn on our individual strengths and we have also worked collaboratively to support each other – taking a long-term view and helping our customers, communities and our country successfully adapt and move forward,” he said.
Nikki Wright, managing director of Wright Communications, who initiated the ESG Report with NZX, said it is good to see that listed companies are grappling with climate risk and its impact on their financial futures.
“Reporting publicly on climate risk is challenging so it is pleasing to see 14 S&P NZX50 companies make a start on climate disclosures. However, there are varying degrees of completeness and a range of formats.
“As an agency with expertise in sustainability communications, we have seen first-hand a greater determination from listed and un-listed companies to lift their game in reporting, to tell more complex sustainability stories and to use Integrated Reporting to explain in detail how value is created for their shareholders,” she said.
Companies are also making successful attempts to understand what really matters to their shareholders and stakeholders. The use of the materiality assessment process appears to be increasing as companies seek to get closer to their stakeholders to find the correlation between internal and external views.
“In putting this ESG Report together it was interesting to discover that some business sectors are now maturing in their approach to sustainability or ESG reporting while other sectors are lagging and will find it challenging to meet new requirements such as transparency on climate risk,” Wright said.
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