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Navigating ESG regulation takes more than a village – it takes a community of solvers

How IFM Investors and PwC worked together to embed ESG frameworks for sustainable investment.


The EU ESG regulations impacting Australian businesses.

The consideration of environmental, social and governance (ESG) matters are now an essential component in any investment equation. With recent landmark EU regulations reorienting global capital flows towards more sustainable businesses and economies, globally-active Australian investment managers have found the regulatory wave has already struck our shores.

One of the largest Australian and global infrastructure investment providers, IFM Investors (IFM), has been working with PwC to understand these global regulatory trends and incorporate them into its own ESG agenda and future reporting.

IFM already takes a leading role in backing both the critical infrastructure and investor communities solving for a more sustainable tomorrow, today. Adding to initiatives already in place, IFM recently committed to reach net zero greenhouse gas emissions across all asset classes by 2050. Responding to global ESG regulations early was a natural extension of these, given the EU’s focus on standardising how ESG information is reported by managers, and products offered.


ESG as DNA in a global and connected world.

“ESG is fundamental to our DNA in a global and connected world”, says Chris Newton, Executive Director for Responsible Investment at IFM. “With long-term investment in impacted assets, we’re leaning into ESG to continue delivering great outcomes for communities and economies around the world. It’s not about politics, but the protection of the environment and people, benefiting all if done right”. 

The business used its long-standing connectivity with PwC to ensure they’re not only compliant, but delivering results beyond the regulatory standard. “The EU is a leader when it comes to ESG”, says Sam King-Jayawardana, Director at PwC Australia. “What happens there, impacts the world through capital allocation and value chain cash flows”.

Together with PwC Partner Alfredo Martinez, the pair co-lead PwC’s engagement with IFM. “This regulation will shift capital flows into greener economic activities”, says Alfredo. “Simply put, the regulations provide a definition of what is and isn’t sustainable and seeks to standardise how this is reported. Investors, large and small can then easily understand and compare ESG outcomes achieved by investment managers and make their own decisions accordingly. Ultimately, it’s real confidence capital providers and investors are seeking - clear, comparable, and transparent disclosure on ESG outcomes in investment approaches and product offerings”. 

“With PwC, we’ve built trust over time for great outcomes together”, says Chris. The relationship shows that regulation can drive positive outcomes in responsible investment, solving in unexpected ways through education. “The combination of technical and commercial expertise PwC brings as a network is game-changing”. Changes will result in broader actions in the decisions IFM choose to make across its portfolio, impacting many aspects of its business from remuneration to marketing to product development.

 

A globally-connected community of solvers.

With a breadth and depth of capabilities in infrastructure, data, due diligence, remuneration, risk management and ESG regulation, PwC continues to provide solutions at key points to help, “IFM  educate businesses they invest in on current and future ESG requirements”, says Alfredo.

Leveraging expertise from a community of solvers across PwC Firms in Australia, Luxembourg, France, Germany, The Netherlands, and the UK, ESG education sessions were developed for hundreds of staff across the IFM network from North America to Australia. “From product development to governance processes, IFM and underlying assets are establishing a clear understanding of what’s required to comply with leading EU regulations”, says Sam. “Providing capability, awareness, and education is critical to ensure any company is moving - as one - in the desired direction, while confirming they’re true to label”.

While areas like climate change means new ESG issues are emerging around the world, many businesses are rising to the challenges to create a real difference. At the same time, Chris says some companies have knee-jerk reactions to challenges, reacting under pressure, and in unpredictable ways, which ultimately undermines trust. For IFM, early ESG considerations are translating to trusted outcomes for companies to communities alike.


Port of Brisbane - an ESG example in action.

As an example, as a major investor in the Port of Brisbane, IFM formed community partnerships to understand how dredging would potentially impact wider ecosystems. Working with universities, communities, landholders, and local farmers, IFM regenerated and revegetated banks of river systems in the Lockyer Valley, over 100 kilometres away. Rivers would be protected from silts after rain, while simultaneously reducing dredging costs.

IFM has recently supported the expansion of these programmes in other parts of the river system. “Examples like this are about investing time and money into ideas making a real impact to the environment, and long-term investor value, while delivering ESG assurance”, says Chris. The EU regulations create a new burning platform for these initiatives, changing the context of the discussion from ‘nice to have’ plans to a critical aspect of business resilience, and substantiation of green claims to the market.



A human-led, tech-powered skillset and mindset for sustained outcomes.

With a human-led and tech-powered skillset and mindset to solve for sustained outcomes, IFM is designing new products focused on emerging technologies in power generation and net-zero infrastructure. “Improving our processes, systems, and analysis in ESG DD - it’s a natural evolution of PwC’s work”, says Chris.



Seeing and solving the bigger picture on ESG, not one piece of the puzzle. 

As a community of solvers, IFM and PwC have come together to build, earn, and share trust in tomorrow by seeing and solving the bigger picture on ESG - not just one piece of the puzzle. Delivering sustained outcomes from companies to communities, “ESG reflects the biggest, and most complex, problems of our time - and we can only solve these problems by business globally and in Australia collectively lifting their ESG performance”, says Sam. “The ultimate outcome of these types of regulations is it forces the conversation now, today - not tomorrow, and not next year. And that’s the best result anyone can hope for, and at PwC is a fantastic problem to help solve”. 

It all adds up to The New Equation.

 

Joanne Murray

Sam King-Jayawardana

ESG Trust & Risk Director, PwC Australia


Alfredo Martinez

Alfredo Martinez

Partner, PwC Australia

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