I know you know.

Friday was an emotional rollercoaster.

It started with a very well-attended breakfast event hosted by the clever folk at Chapter Zero, on climate collaboration between the Board and CEOs. The CEOs who presented (from Fonterra, ASB, and Genesis, respectively) were arguably three of the most in-touch, driven, and personally committed we have in this country. No surprise, then, that the depth of their technical expertise and shining insights came through loud and clear. The ever-impressive Malcolm Johns, for instance, described the shift in mindset from treating climate as a risk, to as an opportunity, and making it a race to the top, rather than the bottom. Hear, hear.

Juxtapose that then, with a deeply underwhelming delivery from the Climate Change Minister who basically blew the cobwebs off one of Nick Smith’s speeches from nearly 20 years ago and trotted out a string of cliches around New Zealand being a fast-follower and government getting out of the way and the market fixing everything. The sound of the collective slumping of shoulders was nigh-on audible. 

On from there to 6 more meetings with clients and friends as to where we go from here (in sum). It sat uncomfortably with me, as we strode around Auckland’s CBD extolling the virtues of effective transition planning, that some guy who was an unknown to this very powerful community of change-makers mere months ago, could so profoundly take the wind out of our sails. The tone from the top can set a very unhelpful direction downwards. Especially when we’re talking with clients trying to get their (already busy, otherwise-occupied with a recession and various other pressures) heads around the labyrinthine complexity that is climate risk reporting. I ruminated (and still do) on his oft-used assertion that he was there to help business get roadblocks out of the way. What does that even mean? And great, let’s do that, but what are they?

Based on the chats we had yesterday, here are a few:

1. The nervousness around Director liability (which has arguably led to some very high-profile recent pullbacks on ambition) due to the mandating of climate risk reporting has led quickly from collective willing (see the Climate Leaders’ Coalition) to collective unwilling. This is not unique to New Zealand, and indeed follows a similar global trend – now referred to colloquially as “green-hushing” - rather than facing up to the risk of individual or collective liability against missing ambitious decarb targets. One might go so far as asserting that this collective hiding of lights under bushels is a rather convenient excuse to pull back from not just ambition, but from having to make some confronting and scary decisions about significant capital re-allocation.
2. It may be just me, but I feel like we were just on the cusp of the point where the “because we have to” argument was starting to get through. The lone ESG wolf in the organisation was just starting to convince the other key stakeholders in the organisation that it was indeed their job to get on board with climate reporting / sustainable procurement / impact assessments….and then some really unhelpful indicators have blown a hefty headwind into their sails. I’ve had a few conversations with CEOs and Boards myself who are, rightly, confused by the message from government that we’ll take a “fast follower” position on climate, and not a leadership position, and so what does that mean? Do I still need a transition plan? Or are these guys going to can the whole regime and should I just keep my powder dry for a while longer?
3. As is always the case, the perceived coincidence of the PM and Ministers indicating a lack of ambition on climate, with the PM’s previous employer making a very public decision to pull back from their public commitment, somehow validates the old talkback radio parlance around PC gone mad and natural climate cycles anyway, and the Gordon Geckos all jump on their comfy old bandwagon and feel seen and validated, rather than outdated and ignored again. Once more into the breach, my fellow naysayers.
4. Times are tough. People are losing their jobs, businesses are closing, we’re all feeling it. Add to this a reporting regime – the first in the world, no less! – that comes with a whopping big bill and confuses the hell out of everyone. Really, why would you? I myself have heard some eye-watering fees being bandied about for helping with the preparation of climate risk reports, and that old chestnut, that no-one reads them anyway.

So what to do, Minister and gentle reader, about these roadblocks?

Here are my reckons:

1. Remind yourself, as my very wise and patient friend Katie Beith at Forsyth Barr says, that this is the very first year of climate disclosures being worked-into annual reporting and planning. We will learn from this, and get better. There will be reviews and lessons learnt and breakthroughs and regrets. The CRD regime will not solve climate change this year. But you know what? We will read those reports, and we will learn from them, and we will have reckons, and we will get so much better. The good news is that we went from that Chapter Zero breakfast (armed with Malcolm Johns’ opportunities mindset and Vittoria Short’s tenacious commitment to integrated change) to several meetings with super-sharp, deeply-motivated professionals across the finance sector, particularly, who were working with whole teams on causing a change in their organisations that but for this disclosure regime, would not have happened. Their future is brighter, their customers are clearer, the business case is far more compelling, their owners are investing in longer-term more enduring outcomes, and their systems are more robust. Opportunities abound, and are seen and known because this ship has already sailed. It is not stopping, Gordon; not matter how much you might like it to.

(And yes, I have to say, one of the things we may have learned in this first year is that some people are paying way too much for their first-year reports. But that they now have the insight to know that, and now have the confidence to know where they actually do need help, and where they can resource-up themselves. As Dr. Amelia Sharman from the XRB told me recently, nearly every speaker at the Responsible Business Europe conference she attended recently said it was "necessary but temporary" - as in, it's a much needed diversion to ensure time and effort is spent on better processes and policies to embed climate into their decision making, but that it won't last forever, and they expect to rebound stronger for it).

1. Don’t get left behind. Or do; that’s your prerogative. We can sit down here at the bottom of the world like a couple of curmudgeonly old men on the porch moaning about the “woke” greenies taking over the agenda and making us pay for our impact, and how far away we are from our markets and how hard it is for us here. Or we can recognise the facts: New Zealand companies don’t buy New Zealand companies: big, rich, offshore companies do. Big, fat global investors do. And they, undeniably, are requiring you to demonstrate that you are a going concern. Over 80% of global investors now say ESG is a critical factor in picking their investments. Somehow, this point is woefully missed by the business trying to attract their investment as they conflate political will with investment markers. This ‘fiddling while Rome burns’ mentality might see you meet your well-worn, short-term KPIs, but will miss the entire point of your core purpose: staying in business. Read the room. It’s not us woke lefties driving the agenda – it’s those big guys at the top of your food chain who want to know they can trust you with their money.
2. Give up on the fact that all of this is up for debate. If you’re getting your facts from right-wing media, here’s a newsflash: it’s their job to make a story. The fact that we are on a warming path that will see global, devastating changes – not to our weather, but to our world, our homes, our ways of life, and our kids’ lives, forever – is locked in. There is no debate on this. This is the world we have created, and we live in now. What you do about it is not a political football to be kicked around and yarned about. The change is done. It’s now down to how much worse we let it get.
3. There is money to be made. There’s a reason Morrison & Co snapped-up Hon James Shaw when he retired from politics. Their long-term investment strategy pays: Tilt Renewables delivered a 40% per annum return for shareholders following its demerger from Trustpower in 2016. 
4. There’s money to be saved. The cost to NZ businesses of Cyclone Gabrielle (yes, Gordon, that was attributable to climate change…) is estimated to be at least NZ$13.5 billion, of which the cost of insured damage is at least NZ$1.79 billion. And yes, Gordon, there will be more of these cataclysmic events. Many more. Put it this way, go ahead and ignore the woke lefties – but a new study from Germany’s Potsdam Institute estimates a 19% hit to global GDP, or $38 trillion annually by 2049 as result of them. It’s going to keep costing us. A lot.
5. You already know how to do this. As my very brainy boss Dr. Sarah Holden says, you wouldn’t set a revenue target without a strong plan and accountability on how you intend to achieve that target, so why would you do so for your emissions targets? You know how to assess financial risk for your entity; so do that. The disclosure regime isn’t out to trip you up; it’s there to overlay a climate risk lens on top of your existing processes, that you already know how to do.
6. You already know what you have to do; you assess net value and you balance it up against your P&L. What I found interesting about all the chat about Air NZ’s pull-back from its SBTi was that people were very magnanimous about it not having been “realistic”. There is a difference between realistic and affordable. I might be being naïve, but I reckon if hyper-transparency and accountability looked like “we set a strategic goal but then we costed it up and it’s going to cost us $2bn a year and that would make it uneconomic”, then people would say “Yip, I get that. Fair enough”. Maybe it’s just me.
7. Get over the fact that “green” equals “cost”. This misconception about the clean economy being an environmental movement is, again, conflating market movement with political will. This is a revenue opportunity based on an enduring technological shift. As clean tech advocate Ramez Naan points out in his TED talk, solar, wind, batteries, and more are not commodities that fluctuate in price—they “are technologies and they drop in cost like technology.” Just like every new technology, clean tech is fundamentally heading in one direction: cheaper.
8. For Boards, particularly, I think the conversation about ambition is confusing. Obviously, any conversation about the role of Governance should incorporate a level of ambition, and capability. But showing ambition in ways that are relevant to your entity specifically, rather than at a high-level. It does not mean buying a Prius and watching Blue Planet. It means figuring out for you where you are willing to make an intervention as a Director in the future direction of your company, in service of all of the above: transparency, integrity, accountability, opportunity, review, innovation. For instance, when you are presented with a solar project that has an ROI of 7 years and your standard ROI is 3, but you know over time the cost will come down and you’re building-in longer-term energy security to your infrastructure plan – that’s a good example of what ambition means at the Board table. There are a thousand ways to measure what’s material to your organisation, but I can pretty-much guarantee you that you already know what they are. If you’re an agri company, it’s emissions (mostly methane). If you’re a retailer, it’s value chain. If you’re a bank, it’s financed emissions. If you’re an exporter, it’s your suppliers. The point at which you demonstrate your ambition is at those moment when your gut is telling you this is the thing. And odds are, you already know what that is.

This tired old parlance about whether we should be leaders or fast followers has had its day. The more we get on with identifying where our impacts are, how much they’re costing, and what we’re doing about it, and stop arguing about the lexicon these impacts are described within, the more we all win. There is only one way to lead from here on in. And we already know the way.

Sarah Holden Katie Beith Daniel Street Malcolm Johns Claire Waghorn Kate Wilson Butler Dawn Baggaley Alec Tang Louise Aitken Abby Foote Brett Ogilvie Allan Birch Joanna Silver Kate van Praagh James Paterson Nadia Wilson Kelly Hyde Louise Tong Kelly Flatz Oliver Ng Jack Kendall Judene Edgar CMInstD JP Judy Ryan Amelia Sharman Camilla Read Kayla Kingdon-Bebb James Walker James Hughes Abbie Reynolds