Many Australian and New Zealand IR professionals are in the midst of embedding ESG data collection and reporting into their work. They are also still exploring how the global post-Covid reopening of international commerce will change how they update the market and travel to see investors.
At the moment, Australasian IR teams are placing emphasis on understanding how the IFRS Foundation’s work to develop a global framework for reporting ESG information, under the International Sustainability Standards Board’s (ISSB) auspices, will affect their work. ‘It’s going to be a huge global issue for all IR associations and companies,’ says Ian Matheson, CEO of the Australasian Investor Relations Association (AIRA). ‘It will materially change how companies report to the market.’
Matheson and AIRA’s members expect the adoption of the global ESG reporting standard to have a profound influence on the future nature of the IR role. So much so, the association has changed its vision statement to reflect the growing importance of sustainability in corporate and investor community communication and engagement. The new vision statement recognizes the role investor relations plays in creating sustainable value for all capital market stakeholders.
AIRA has also established a new ESG chapter to formally bring individuals in ESG or sustainability roles within listed entities into the AIRA fold, Matheson says. ‘Many of these people already work closely with the IR team and are often responsible for ESG reporting and data collection as well as engagement with the investment community,’ he adds.
Many competing priorities
Frances Van Reyk, Ampol Australia’s head of IR, says the largest transport energy distributor and retailer in the country is now working through new ESG reporting requirements. This work has a trans-Tasman focus, given Ampol’s acquisition of New Zealand fuel distribution and service station network Z Energy. New Zealand is presently introducing compulsory climate change reporting against the requirements of the TCFD for listed businesses of a certain size.
Ampol’s Australian business is also working through these requirements. The ASX 100 company has more than 1,800 service stations around the country. With a market capitalization of A$7.2 bn ($5.1 bn), it is one of the most influential market players as electric vehicles (EVs) become more popular and charging stations for them need to be installed across Australasia. The Ampol IR team’s program of work reflects this focus.
‘This year we’re looking to issue our first climate report as part of the energy transition process,’ Van Reyk says. ‘We’re also looking at how we might be able to provide charging solutions for the first phase of on-the-go charging and the role alternative energy sources like renewable fuels or hydrogen may play in our company’s future.’
Presently, Ampol is exploring how different energy scenarios may unfold in the future and identifying data sources required to model future demand for new energy sources. Van Reyk says given the Intergovernmental Panel on Climate Change has set out 99 potential scenarios that could play out, while the International Energy Agency has only four, the market wants confidence fossil fuel businesses are making rational assumptions about their futures.
Risks and opportunities
From an IR perspective, Van Reyk says investors want to understand the risks to and opportunities for the assets they own, as a result of the growing emphasis on ESG reporting and performance. ‘Investors have varying views on the pace of the energy transition,' she says. 'They want to know we have got the balance right in terms of the pace and the amount of investment.’
At the moment, Ampol is working hard to better educate the market about the extent to which fossil fuel revenue sources may be replaced by income from new products such as EV charging. But it is challenging for investors to make meaningful assumptions around this transition in its early years.
A key variable here is government policies including subsidies for EV purchases to accelerate the transition to clean energy sources such as electricity. Ongoing global supply-chain entropy that is slowing EV imports is also a material risk.
On the flipside, at a more macro level, some global investors may screen out businesses from their universe of potential investible assets if a company does not have a mature approach to ESG reporting, up to and including a Scope 3 target. There are three scopes under the global reporting GHG Protocol Corporate Standard and Scope 3 involves companies reporting to the market on greenhouse gases emitted by the businesses to which they are connected in their supply chain. It’s a highly intricate and difficult process.
At the same time, investors are also interested in understanding more about energy security and an orderly transition from fossil fuel to clean energy sources. These are just some of the issues the Ampol IR team is grappling with.
Skills beyond climate change
After issuing its second sustainability report last year, WiseTech Global is one Australian business that is bumping up its sustainability acumen in its IR and broader executive function. WiseTech is a leading developer and provider of software solutions for the world’s supply chains.
The A$19.5 bn business appointed in 2022 a new head of ESG, Alicia Burgmann, who reports to WiseTech’s CFO, Andrew Cartledge. Charlotte West, whose extensive experience was largely earned in the UK, was also appointed in 2022 as WiseTech’s new sustainability specialist. Ross Moffat, head of IR, says WiseTech is now working on internal ESG strategic frameworks to integrate sustainability across its business and data collection methodologies with an eye to emerging sustainability reporting requirements.
Of course, climate change is just one aspect of ESG. Australasian businesses are also building their capabilities around their social and governance responsibilities.
Fisher & Paykel Healthcare’s IR manager Hayden Brown says modern slavery reporting as an aspect of ESG is an area of focus for Kiwi IROs right now. The NZ$14.5 bn ($9.3 bn) business is a leading designer, manufacturer and marketer of medical devices and technologies.
‘Modern slavery in the supply chain is something we’re working on and we’re putting a lot of effort into increasing our disclosure in this area, especially in our annual report,’ Brown says.
This takes mammoth effort given the business has more than 2,000 suppliers, each of which is being reviewed. ‘The thing about modern slavery is, if you haven’t found it, you’re not looking hard enough,’ Brown adds. ‘It’s onerous to pull all that together and the work we put into this is just going to continue to grow.’
The Fisher & Paykel Healthcare IR team is also working through the Taskforce on Nature-related Financial Disclosure’s (TNFD) requirements. In the same vein as the TCFD, the TNFD is a framework against which companies report nature-related risks such as the potential for threats to global biodiversity.
‘We’re also looking at setting more net-zero targets,’ Brown says. ‘We already have science-based targets to reduce our carbon emissions so we’re exploring additional disclosures in this area.’
Managing growing reporting requirements for ESG investor surveys and indices is a perennial challenge for IROs in Australasia. While these demands were traditionally associated with global operators, local stakeholders are also now increasingly asking companies such as Fisher & Paykel Healthcare for information about their sustainability performance. A recent survey sent to the company from share-broking firm Forsyth Barr is an example.
‘We look to complete as many of these surveys as we can but they require considerable work and resources,’ Brown says, adding that the risk of not engaging with the market on these surveys is loss of potential investment capital.
Back on the road – and up in the air
Building relationships with non-traditional shareholders is a further priority for many southern hemisphere IROs.
Jill Campbell, group general manager of investor relations for ANZ, one of Australia’s big four banks, is building relationships with investors for which direct contact in the traditional sense – such as one-on-one investor meetings – isn’t the model. This group includes the growing cohort of very large, often passive, funds like BlackRock, State Street and Vanguard, as well as a multitude of specialist funds. ‘Really getting to know those groups can be more challenging,’ Campbell says.
She explains that at ANZ, engagement with those funds is more often than not the province of its stewardship team and the content of these meetings centers on ESG-related topics. ‘This focus is understandable, given any company’s ESG bona fides speak directly to its view on risk management,’ she says. ‘But other topics up for discussion vary from fund to fund, and getting to grips with that is a growing challenge.’
Long-term trends aside, Australasian IROs are back on planes, traveling to see shareholders in global markets. They are also looking forward to welcoming more international investors as travel normalizes post-pandemic.
‘We’ve been Covid-constrained in terms of travel but now we want to go back to visiting international investors in person,’ says Van Reyk. ‘That has the potential to change the share register, which became very domestic-heavy over the past few years. It’s very hard to attract new investors when they can’t get here.’
Travel aside, many Australasian IROs are exploring how new digital tools can automate their processes and elevate them from procedural repetitive tasks. WiseTech is an example. The business recently rolled out a new online knowledge hub for investors. This portal centralizes information such as profiles of the senior management team and other corporate and product information.
‘We’re learning and taking small steps to leverage a digital approach to communication,’ says Moffat. ‘This reduces the time the executive needs to spend educating investors about the basics, which allows us to be more efficient.’
Tech in the IR tool box
His team is working through how it can further scale and replicate its existing content, extending a similar project that has been rolled out across other parts of the business.
The launch of WiseTech’s knowledge hub coincided with the re-emergence of global investors in the Australasian market, which has freed up Moffat and his team to spend more time with them. The business expects to use mainly virtual meetings to communicate routine market announcements such as results presentations and also for broker-sponsored investor meetings.
Moffat notes it’s still a work-in-progress but says ‘analysts and fund managers are short of time so it makes sense to still use an online model for these meetings.’ WiseTech has yet to decide whether to take part in broker conferences in person or virtually. ‘I expect we’ll do a combination of both,’ Moffat adds.
He says if a commitment is made to take executives on an overseas roadshow, he has to be sure a sufficient number of investors will want to meet his team and the C-suite face to face, or there’s little point in getting on a plane. This has been a challenge through the tail end of Covid as investors have balked at coming back into the office for in-person meetings even when executive and IR teams from companies based in different jurisdictions are in town.
The IR talent pipeline is a further focus for WiseTech, with a recent initiative to rotate members of the finance team through the IR function.
Overall, IROs in Australia and New Zealand are working through many of the same issues their colleagues in other markets are facing, just from a distance. It gives them a unique perspective they are keen to apply to their work, for the benefit of their businesses.