An electric car is charging at Meridian EV charging station

Investing in net zero carbon starts now

Reducing our own carbon footprint

In FY20 our actions ranged from planting trees and electrifying our fleet to once again reporting on how climate change impacts our business.

Climate action remains the key focus of our sustainability efforts. As always, being a 100% renewable energy generator means that our emissions from generating electricity are zero, and our renewable generation is our most important contribution to climate action. But to make a meaningful difference we must also show leadership.

Understanding how climate change impacts us

In FY20 in our TCFD report (using the guidelines published by the TCFD), and in our submission to the CDP, we for the first time evaluated the potential financial impacts of climate change on our business – both the physical impacts and the impacts on electricity demand from climate action policy. It’s important that we understand this information internally as we make plans for the future, and it’s increasingly of value to investors as they seek to understand which companies have better long-term prospects than others in the context of climate change.

Overall, climate change isn’t good for anyone’s business. The pathway we’re on globally at the moment, towards a 4-degrees-warmer world (or higher) will have devastating impacts on our societies, economies and natural resources. It’s not hard to see how this will cause some significant problems for businesses, given that businesses can only thrive in societies and natural environments that are stable, resilient and sustainable.

Our analysis of how climate change affects us is undertaken out to 2050, as this is the horizon we use for making decisions on new investments. In that timeframe, the physical impacts of climate change are much the same, regardless of the temperature increase scenario chosen from the Intergovernmental Panel on Climate Change. For us as a generator from natural resources, these physical impacts are both positive and negative.

In the next 30 years we’re likely to get more water in our hydro catchments, and that water may change in seasonality to better match demand (potentially lifting medium-term revenue by $12 million per year). Higher temperatures are likely to have a mild positive impact on electricity demand through increased air-conditioning requirements and increased irrigation, offset by reduced winter heating loads (with a potential positive impact of $5 million per year). However, higher temperatures will also increase the likelihood of extreme rainfall events, which may then increase the ‘probable maximum flood’ that we optimise our hydro operations to cope with. In response we may need to upgrade our dam structures and change our flood-management rules, which could have an annualised potential financial impact of $11 million from when the probable maximum flood increases.

So, without strong climate action policy, in Aotearoa and globally, there is a risk of our having no business in the very long term, but in the next 30 years the impacts are fairly neutral.

Strong climate action policy is also a mix of positive and negative for our business. Strong policy settings are likely to increase electricity demand from increased requirements for charging of electric vehicles and the transition of some industrial heat processes from coal to electricity. Combined, this increase in medium- to long-term revenue could be $7 million per year. Policy that increases the percentage of renewable electricity on the grid may be positive for us in that we could build more renewable energy power stations; however, it’s also likely that price volatility will increase, with a potential negative medium-term financial impact of up to $40 million per year. We could also see a sector of the economy negatively affected by climate policy in a way that reduces demand. For example, a significant reduction in the dairy industry could reduce our revenue by $12 million to $17 million per year.

For context, our revenue in FY20 was $3,405 million, so the potential impacts that can be modelled are not large in scale in the context of our business. But the true impact of climate change is hard to estimate, particularly if the world fails to move to a path to reduce emissions radically in the next two decades. For more details, see our TCFD report.

Green Finance Framework

Investors are increasingly looking to demonstrate a “green” investment portfolio as evidence of their commitment to sustainability, and many use frameworks, standards, rating agencies and others to find investments that meet their criteria.

Meridian rates highly in the MSCI, and is also listed on the Dow Jones Sustainability Asia Pacific Index and submits to the CDP. These are all tools that investors use to positively screen their investment portfolio.

In addition, In FY20 we have developed a Green Finance Programme which covers both existing and future issuances of debt instruments. This Programme recognises Meridian’s commitment, leadership and investment in renewable energy and will be used to finance or refinance sustainable projects and assets such as new or existing renewable energy projects or assets.

The Programme enables Meridian to connect its company strategy and vision to its financing requirements and provides investors with an opportunity to invest in a range of accredited debt instruments. The proceeds of these have been allocated (directly or notionally) to eligible Wind and Hydro assets that meet the Market Standards.

Half by 2030, and zero through offsets right now

Part of understanding how climate change impacts us, is understanding our own carbon footprint. We’ve restated our base year (FY19) operational emissions to include emissions from Transpower, New Zealand’s transmission provider. This brings our base year operational footprint up to just over 47,000 tC02e (tonnes of C02 equivalent).

Meridian Group Greenhouse Gas Emissions FY20 (tC02e)

tC02e FY19 FY20
Scope 1 1,099 1,177
Scope 2 1,605 17
Scope 3 operational 44,574 43,165
Total Group operational emissions** 47,278 44,359
Scope 3 energy purchased and onsold*
New Zealand electricity 0 0
Australian electricity and gas 611,822 813,054
Scope 3 one-time construction and upgrades 68 32
Total Group value chain emissions 659,168 857,445

*Group operational emissions are offset, using Gold Standard Voluntary Emissions Reductions (GS VERs) and credits purchased by Powershop Australia as part of NCOS, and taking into account credits cancelled by suppliers against their own emissions.

**Emissions from our electricity purchased and onsold are calculated using market-based methodologies. In New Zealand we use annual netting off methodology. In Australia we use the National Carbon Offset Standard (NCOS) administered by the Austrailan government.

Our goal is to cut this in half by 2030. In FY20 our major reduction initiative was to use our own Certified Renewable Energy product for our Scope 2 emissions. We also cut emissions from air travel and employee commuting significantly, given the travel restrictions that we all experienced, and we have an internal project underway to lock in those reductions for the long term. We also continue to make progress on the electrification of our fleet.

Progress against our Half by 2030 goal (tCO2e)

Carbon Reduction chart
Reduction target Group emissions
Carbon Reduction mobile chart
Reduction target Group emissions

What we can’t reduce we offset, using Gold Standard Verified Emission Reductions, and we've chosen to use those carbon credits to support wind farm and solar projects in India. In the longer term, our Forever Forests programme will enable us to grow our own carbon offsets.

Working with our suppliers

The bulk of our carbon footprint is in our supply chain. This makes our work to engage our suppliers crucial if we are to achieve our reduction targets.

In the generation side of our business, we have local and global suppliers provide us with the parts and components needed to build and maintain our generation assets, as well as a mix of general engineering consumable and specialist parts' suppliers, and service providers including ICT and facilities' management providers. More than 1,100 people are employed directly or contracted to us. The majority of our work is conducted by permanent employees, not contractors.

In our retail businesses we have very short supply chains because the physical assets used to distribute electricity and meter its use are managed by national and local lines and metering companies. Our retail operation requirements are similar to those of many corporate offices. They include physical facilities and ICT, sales and marketing, billing and governance functions.

Total operational greenhouse gas emissions by scope (tC02e)

Total operational greenhouse gas emissions by scope (tC02e) - pie chart
Scope 1 - 1,177 (3%)
Scope 2 - 17 (0%)
Scope 3 - 43,165 (97%)

Supplier Engagement Plan

Focus on high impact suppliers

1.Identify > 2.Engage > 3.Achieve
  • Critically (risk/spend)
  • Modern slavery risk assessment
  • High GHG emissions
  • Sustainability impacts specific to that category
  • Relationship and contract managers
  • Procurement specialist
  • The Sustainability team
  • Carbon data and assessment of modern slavery risk
  • Suppliers moving from giving us data to reducing their impacts
  • Embedded use of our Supplier Code of Conduct

Deepen our sustainable procurement capability

1.Quiz > 2.eLeaning module > 3.Team-by-team workshops > 4.Quiz
  • Company-wide sustainable procurement quiz to set baseline
  • To be completed prior to each workshop
  • Focused on good and services specific to each group
  • Repeated of company wide quiz, to evaluate training effectivess

Other strategies

  • Hold workshop (one-to-many) for lower impact suppliers on carbon and sustainability.
  • Working groups for specific categories (for example sustainable events, sustainable apparel).
  • Lowest risk suppliers we address at the process level (Supplier Code of Conduct).

Supplier Engagement Plan

Focus on high impact suppliers

indenty panel
  • Critically (risk/spend)
  • Modern slavery risk assessment
  • High GHG emissions
  • Sustainability impacts specific to that category
engage panel
  • Relationship and contract managers
  • Procurement specialist
  • The Sustainability team
achieve panel
  • Carbon data and assessment of modern slavery risk
  • Suppliers moving from giving us data to reducing their impacts
  • Embedded use of our Supplier Code of Conduct

Deepen our sustainable procurement capability

quiz panel
  • Company-wide sustainable procurement quiz to set baseline
elearning module panel
  • To be completed prior to each workshop
team-by-team workshops panel
  • Focused on good and services specific to each group
quiz panel
  • Repeat of company wide quiz, to evaluate training effectivess

Other strategies

  • Hold workshop (one-to-many) for lower impact suppliers on carbon and sustainability.
  • Working groups for specific categories (for example sustainable events, sustainable apparel).
  • Lowest risk suppliers we address at the process level (Supplier Code of Conduct).

In addition to our supplier engagement plan, we’re investigating partnerships with other organisations to empower our suppliers that are small to medium in size to take climate action in ways that work for their businesses and get us on our way to a net zero carbon Aotearoa in 2050.

Encouraging climate action by our people

In FY20, we have started encouraging our people to take climate action, both at work and in their own lives, to help Meridian reach its goal of halving our emissions by 2030. The first piece of this programme “Move”, is one of the five pillars of our company’s internal sustainability culture programme. This pillar supports our people to change the way we get around, by encouraging low carbon connections and innovation in how we move and work, locking in and improving on the changes that we all started during lockdown.

As part of this work and to help keep climate action at the front of our peoples’ minds, we're also going to introduce the Future Fit programme in September. This is a big piece of work that will require all of us, right across the business and in our communities, to work together to figure out how we can take significant climate action in our everyday lives. We all need to start making changes to ensure our children’s future.