The recent AFR Business Summit took place during one of the most volatile weeks financial markets have experienced in a decade.
However, amid the talk about short term market disruption there were robust discussions about how businesses can move forward, invest for growth and prosper in the broader economic context, particularly if they truly focus on managing their risks relating to environmental, social and governance (ESG) issues.
“Environmental, social and governance considerations are very much a top priority for many Australian corporations today, with sustainability really being thought of as a core part of investing for growth,” Commonwealth Bank’s Group Executive for Institutional Banking & Markets Andrew Hinchliff told a breakfast panel on Day 2 of the Summit.
His was a sentiment echoed many times by speakers from several listed companies. They said ESG was not on the radar 15 years ago. But now the ESG specialists had a seat at the top table and those risks were factored into all company decisions. They emphasised that all of the equation needed to be taken into account – not just environmental but that social and governance risks were increasingly important.
During the Summit we were pleased to unveil a new $400 million three-year bilateral sustainability-linked loan (SLL) to retailing conglomerate Wesfarmers. It is the largest SLL by a single lender. These types of loans directly link certain metrics to the financing. This loan is the first of its type in Australia to include a social metric. That means in return for finance, Wesfarmers has agreed to increase the number of Indigenous employees in its workforce and to reduce carbon emissions at its chemical business in Western Australia.
Wesfarmers Executive General Manager of Corporate Affairs, Naomi Flutter, said employing more Indigenous workers and cutting carbon emissions were commitments that went to the core of the company. “They go to the sustainability of our business. If our business better reflects the communities in which we operate it will perform better in all circumstances,” Flutter told the Summit audience.
Just five of these ground-breaking sustainability-linked loans have been signed in Australia. They are just the beginning of a new era in lending in which financing can incentivise companies to operate in a way that provides more sustainable outcomes for their shareholders and the communities in which they operate.
Transformation and creating partnerships
Earlier at the Summit, Hinchliff talked with peers from Coles Group and DXC Technology about how companies need to transform in order to adapt to changing times.
“Transformation is difficult, you have to take people along on that journey with you. It takes clear articulation of a vision. It’s about empowering people to exercise judgement and situational awareness. Leadership happens all the way through an organisation,” he said.
CommBank Executive General Manager for Global Markets Anthony Hermann also spoke at the Summit about investing for growth in a low-yield world. He said the markets earlier had experienced unprecedented volatility but CommBank’s role was to help clients find capital so they could keep running their business.
“We have the healthiest balance sheet in the country, we will use it to help our clients,” Hermann told delegates.