Infratil: Navigating climate-related issues at the board table

A confluence of factors – climate disclosure regulation, stakeholder expectations, climate litigation, scientific evidence on atmospheric CO₂ and the impacts of climate change – have put climate change squarely on the board agenda, says Infratil chair Alison Gerry.

She advises companies to be prepared to invest time and capital, and in resources and tools, and start early – though some companies may no longer have the luxury of time, in which case they need to just start.

“Focus on ensuring there is a robust, well-documented process, and take time to understand what the process and governance for climate issues looks like,” she says.

“Make time to fit climate – and sustainability more broadly – into the board agenda. Don’t put it in the last slot, allocate an appropriate amount of time and allow for questions and comments.”

Climate change and sustainability more broadly are topics of interest to all Infratil’s directors, she says, so responsibility for oversight and governance of these issues sits with the whole board.

“Sustainability, including issues relating to climate change, has become such an area of focus that it is a standing agenda item for every board meeting.”

Gerry says the infrastructure investment company is also “cognisant” of the desire from stakeholders – investors, lenders, communities, regulators and portfolio company customers – to take action.

“Given this, and the criticality and systemic nature of the issue, it’s fitting that companies dedicate an appropriate level of capital and resources, while also seeking to integrate the issue and lift capability across the business, for staff, management and directors.

“Risk management systems need to be reviewed and updated to ensure they sufficiently consider climate-related risks.

“It is also important to focus on both sides of the climate coin – risk and opportunity. Our portfolio, particularly the renewable energy platform, has benefited from the transition to clean energy.”

There is no right or wrong approach – but you must have an approach, she says. Different companies will structure themselves in different ways, depending on their unique circumstances.

Infratil found it useful to undertake some voluntary climate disclosures ahead of the mandatory requirements kicking in, Gerry says, to “stretch our muscles before the race”.

“Encourage management to draw on relevant skill sets in wider teams – such as relevant existing skills and processes in the finance team, which may provide the benefit of allowing for segregation of duties.”

Measuring emissions is an important first step to understanding footprints, and Gerry encourages companies to improve and expand measurement over time, which will help focus efforts for driving emissions reduction.

“Measuring and reporting our emissions has been an important step to understanding the impact of our portfolio,” she says of a company that invests in renewable energy, digital infrastructure, airports and healthcare assets with operations in New Zealand, Australia, Asia, the US and Europe.

“From there, working out how to set a robust target that is relevant to our sector was the next step – which culminated in setting a target using the Science Based Targets initiative financial institution framework.”

Gerry says their experience aligns with the findings of a study in 2023 by Climate Impact Partners that looked at the climate action of the world’s top 500 companies, representing about US$41 trillion in revenue.

“Essentially, they found that three markers are correlated with driving emissions reductions in companies: measuring and reporting emissions, setting a 2030 target (35 per cent had a SBTi commitment) and having a chief sustainability officer (or equivalent) to coordinate and drive action.”

The Audit and Risk Committee also plays a role, having responsibility for oversight of the process involved in preparing and reviewing Infratil’s external reports, much like the role it plays with the company’s annual and interim financial reporting.

“Of course, the ARC also has responsibility for oversight of Infratil’s risk management system, which incorporates management of sustainability and climate-related risks,” she says.

Infratil has had a long-standing focus on clean energy and the energy transition, given Infratil’s investment in renewable energy dates back to 1994, with the acquisition of shares in Trustpower (now Manawa Energy).

“This has only grown with Infratil’s renewable energy platforms expanding to include multiple jurisdictions,” Gerry says.

“As well as engaging directly with senior management in those companies, we have access to a number of renewable energy and sustainability experts. We’ve also had other climate-related external experts engage with the board – for example, from Oxford Economics – and we have more engagements planned.

“Identifying, quantifying, and reporting on climate-related risks and opportunities requires the involvement and input from many parties, internal and external.”

While some emissions reduction initiatives are relatively easy to deploy, Gerry says decarbonisation can be challenging in certain sectors, or in some circumstances, such as when companies are relatively newly formed, or growing rapidly.

She cites, as an example, Wellington Airport, which is in Infratil’s portfolio. “While the company has identified initiatives to reducing its operational emissions (Scope 1 and Scope 2) to net zero by FY28, it is more challenging to reduce indirect emissions, such as those associated with flying and land transport.

“The key is to tackle what is possible in the short term – such as supporting electrification of short haul flights and airport bus services – and collaborating to address the more complex areas.”

Gerry says she values the IoD’s Chapter Zero NZ initiative because directors need to draw insights and increase their understanding from a range of sources – from podcasts and webinars, to written material, to in-person events.

“Chapter Zero has a curated suite of resources and events in a range of formats that cover topics from jargon-busting (climate change has its own vernacular), to directors’ duties, disclosure, and transition plans. It’s a great way to keep up to date on a complex and dynamic topic,” she says.