Forsyth Barr C&ESG Ratings Report Finds Listed Company Emissions Starting To Trend Down

Companies leading the sustainability agenda are starting to gain traction on emission reductions, according to the third Carbon, Environmental, Social and Governance Ratings Report published today by wealth management firm Forsyth Barr.

In a major piece of work that analysed 9,500 data points from 61 of New Zealand’s best-known businesses listed on the NZX, the Forsyth Barr C&ESG Ratings Report is an influential piece of research that differs from other ratings assessments due to its methodology, high level of transparency, and focus on New Zealand-specific considerations.

The 61 companies, including household names such as Auckland Airport, Meridian Energy and Spark, account for around 97% of the NZX’s total market capitalisation and are responsible for 13% of New Zealand’s greenhouse gas (GHG) emissions. This year, Briscoe Group, Turners Automotive, Gentrack and Vista Group were added to the list of companies under review.

The report includes a detailed scorecard of all 61 companies and their C&ESG rating. Based on a unique scoring system, they are classified as Leaders (12, up from 11 in 2023), Fast Followers (30, down from 33), Explorers (18, up from 13) and one Beginner.

Positively, long-term greenhouse gas emissions monitoring and reporting has led to tangible change. Of the 37 firms in the Report who have reported emissions for more than five years, 18 showed a decrease in scope 1 and 2 (direct use) emissions, up from 13 last year.

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Forsyth Barr Managing Director, Neil Paviour-Smith says “despite economic challenges, changing political agendas and greenwashing concerns, NZX-listed companies are continuing with their sustainability agendas. Most companies are sticking to their publicly stated commitments for the moment, unlike some large international corporates. However, sentiment towards C&ESG aspirations has clearly changed. To ensure the wider agenda rebuilds trust and credibility, publicly stated commitments must be realistic and achievable.”

Mr Paviour-Smith says 2024 was a watershed year for many listed companies as they grappled with the mandatory New Zealand Climate Standards and a heightened focus on greenwashing, with investors demanding greater authenticity and transparency.

“Mandatory climate related disclosure is standardising climate information provided to the market. However, it has been an arduous and very expensive process for many companies, especially for those with relatively little experience in climate reporting,” Mr Paviour-Smith says. “We welcome steps being taken to review this regime and hope for a less complicated approach enabling shareholders to get a clear understanding of relevant and material issues going forward.”

Report lead author and Forsyth Barr Head of ESG Katie Beith says a key differentiator between the C&ESG Ratings Report and other ESG rating agencies is the split of Carbon metrics from the Environmental category.

“Carbon tends to dominate in typical Environmental ratings. Given New Zealand’s economic reliance on the natural environment, we did not want to lose sight of other environmental matters such as water consumption, waste management and biodiversity protection, while also giving appropriate weight to the low carbon transition underway.”

“In our overall Leader group, the top three performers were Meridian Energy, Contact Energy and Mercury. The Utilities sector has really stepped up this year with Genesis Energy coming into the Leaders category and Manawa Energy as the biggest improver. Meridian has remained at the top of the table for three years running. This is particularly impressive when you consider the changes to our methodology and that we have been raising the bar on our expectations of companies,” she says.

“Other significant improvers were The Warehouse Group and Heartland Group, and it was heartening to see the Leader group expanding with three new entrants to that group: Chorus, Genesis Energy, and Oceania Healthcare.”

Ms Beith says there was a continued gradual improvement in most Environmental metrics, most notably with companies putting environmental management systems in place and building or tenanting Greenstar Level 6 buildings. Another positive result was the declining figures for companies reporting an environmental fine or breach over the last three years.

Companies with a commitment to implement circular economy principles also showed a solid improvement from 47% companies in 2022, to 59% in 2023, and 62% this year.

On the downside, waste sent to landfill continued to rise for all but seven of the 23 companies that have been reporting on the metric for more than five years. Companies with a commitment to preserve and protect biodiversity and natural ecosystems stagnated given 64% made commitments last year compared to 62% this year.

The increase in companies (from three to six) committing to reporting against the Taskforce on Nature-related Financial Disclosures (TNFD) was a good sign that local companies are considering the link between nature and business. However, all six were yet to publish a TNFD report.

Ms Beith says one unintended consequence of the implementation of the New Zealand Climate Standards was a reduced focus on other sustainability issues and initiatives.

“Sustainability practices and policies are now business-as-usual for these companies. However, this year we suspect that the resources required to meet the NZ Climate Standards had been diverted from other sustainability initiatives. We hope this is a short-term hiatus and companies soon switch focus back to broader action on sustainability.”

She noted that the new companies under the spotlight in this report had held their own, with Gentrack and Vista coming in as Fast Followers and Briscoes and Turners Automotive entering as Explorers.

“More New Zealand companies have turned their attention to acting on the sustainability agendait’s not just the largest companies with big teams dedicated to sustainability,” she says.

The full methodology is available in the report, as are the individual scorecards for each of the 61 companies assessed. In addition, the scores are disaggregated so readers can see exactly what they consist of and how they are calculated.

The information is sourced by Forsyth Barr from publicly available sources and from the companies themselves.

The Forsyth Barr C&ESG Ratings Report, the 61 scorecards and the separate Forsyth Barr C&ESG Rating Methodology document are all freely available and published on the Forsyth Barr website: https://www.forsythbarr.co.nz/corporate-news-events/c-and-esg-ratings-report-2024/

About Forsyth Barr

Forsyth Barr is a staff -owned NZX firm providing a full range of investment and wealth management services including portfolio management, investment advice, sharebroking, research, investment banking, cash management, investment funds and Summer KiwiSaver. Founded in 1936, Forsyth Barr has 25 offices across New Zealand, employing over 500 people and managing or advising on over $25 billion of clients’ investments.

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