In 2018, Renewi group treasurer Adam Richford filled us in on his ambitious project to green the company’s entire treasury function. We caught up with him to find out about the skills journey he has been on since then.
Ordinarily, a treasurer’s discussions with rating agencies tend to focus on the credit profile of the corporate in question. But with us, our mission has led to conversations about our ratings from an environmental, social and governance (ESG) perspective. So, we’re now talking to the same institutions – for example, S&P – about our sustainability performance, together with how it’s evolving, growing and changing, and how we should best articulate that.
Those talks have underpinned my transition towards becoming a strategic partner of the executive team – particularly in terms of emphasising Renewi’s role in the circular economy, climate change mitigation and avoiding resource depletion. Sustainability has also become a strong theme on the equity side, via the Principles for Responsible Investment scheme that many asset managers have signed up to.
In parallel, we’ve seen the introduction of green finance taxonomies, such as the EU’s. As a result, there’s a real push to align our reporting requirements with those frameworks, so we can explain to financial institutions where and how we’re putting their money to work – and how that activity is contributing towards meeting the requirements of the Paris Agreement.
This has all provided me with quite a natural home as a ‘voice box’ of Renewi – talking to our lenders about our overall performance, then drilling down into green financing and the key challenges around our sustainability agenda. How can we describe it in greater detail? How can we improve what we’re doing in that field, set targets for it and support it with a clearly defined strategy?
We have quite lean head office functions, and the CFO was managing all of our IR activities himself. To free up some extra bandwidth on his side for more strategic tasks, he delegated IR to me, and I was happy to provide that support.
At first, I was mostly involved with presentation of our results materials and annual report, together with our sustainability review. Since then, that part of my role has extended more towards talking directly to investors, as well as managing some of our relationships with brokers and analysts.
It’s an interesting brief, because I’m describing what the company is doing to a different audience set. Whereas previously it was debt investors, now it’s equity. I’m still talking to external parties to set out what Renewi is up to, and how its initiatives benefit company performance, society and the climate – but I’m approaching it from a different angle.
Rather than coming at it from a credit perspective – which necessarily tends to focus on risks and the various credit concerns that banks may have – the perspective of the equity audience is much more oriented towards the upside potential of the business model. I’ve found that side of IR quite a natural fit for my communication skills.
Yes, this follows on quite neatly from the IR remit. The skills element on this front was mainly around planning and executing the secondary listing, and achieving a state where that and the primary, London listing were working in strategic harmony for the wider benefit of the firm.
The key issue here is that Shanks Group Plc was Renewi’s predecessor firm, and in early 2017 it completed the acquisition of Benelux waste management business Van Gansewinkel Groep. The merged business was then rechristened Renewi.
At the time, we were listed in the UK – but in bringing the two businesses together, it became clear that 90% of our activities were concentrated in the Netherlands and Belgium. People in those territories were aware of the brand and saw it in action on a daily basis in the form of 2,500 trucks and 165 operating sites. Brand recognition was high.
In addition, out of our 6,500 employees, more than 6,000 are based in the Netherlands and Belgium. All of which means that we are fundamentally a Benelux business.
Now, in terms of the essential listing structure, a company of our size and geography could quite readily maintain its activities via a single, London listing – after all, capital markets are international, so in purely financial terms, that doesn’t really matter. But what swayed our decision was that in the recycling world, the Netherlands and Belgium are simply much more advanced than the UK.
We’ve spent a lot of time talking to London-based investors, analysts and brokers who don’t yet fully experience the circular economy [for full details on that term, read this recent piece from The Treasurer]. That will change as the relevant practices become more embedded in the UK – but we may be 10 to 20 years behind the Netherlands and Belgium.
The main concept behind the circular economy is to constantly put waste back into reuse. We make a product from virgin material, it becomes waste; the material is put back into making another product, it becomes waste – and so on.
In the UK, we currently have a landfill rate of around 20%, but in the Netherlands and Belgium, it’s more like 1%. Those territories made a transition away from landfill about 15 to 20 years ago, and they did so by boosting incineration capacity. Indeed, they created an excess so they could import burnable waste from other countries.
We’re a recycling business with no incineration capacity, and the Netherlands and Belgium are looking to transition away from incinerating waste – by 2030, the Netherlands wants 50% of manufacturing materials to come from secondary sources. This all ties into the investment proposition, which is that the target audience we are trying to reach understands our circular economy ambitions better than the London market.
By increasing our number of investors in continental Europe, we could diversify away from the London market and ensure that a greater proportion of our share register is rooted in the eurozone. We also wanted to be attractive to continental investment funds raised specifically for ESG purposes. If there were funds out there looking to make a positive impact, we wanted them to invest with us.
Finally, we wanted to provide investors with flexibility. Our shares are quoted in sterling, but our underlying profits are in euros. It’s perfectly possible for a continental investor to purchase shares in sterling via the London listing, but that still leaves them with an FX position to manage, which will become part of the costs of the investment.
Looking at how we’re positioned 18 months later, we now have about two-thirds of our investments coming through London and a third coming from the Euronext exchange in Amsterdam. We’ve seen more ESG investors join the share register, too.
So, overall, the listing has been remarkably successful. It’s raised our market exposure, boosted our access and increased the number of people who can interact with the stock. That’s all been very positive for us.
I’ve been looking after our insurance team for a year or so, focusing mainly on claims handling and insurance placement. It’s not an area in which I have deep expertise, so my oversight is essentially to ask all the right, simple questions and ensure I understand: a) what we’re doing; b) why we’re doing it; and c) whether I can add value by spotting opportunities to do things better or differently. But it’s been a fascinating time.
It’s a difficult insurance market right now – what we colloquially term a ‘hard market’, which means that premiums are increasing and insurers are withdrawing, so available capacity is constrained. As such, insurers are being much more selective in terms of the risks they’re prepared to underwrite.
Our industry has a number of insurance risks – particularly fire, because we process some flammable waste materials. So, it’s been interesting to join the market and talk to insurers about Renewi’s performance. Their feedback, I’m pleased to say, indicates that Renewi has better standards than almost all of our competitors, which makes us highly insurable. That’s good to hear.
Nonetheless, our premiums are going up because the risk environment has expanded. For example, we’re facing increased cyber risks, particularly around ransomware attacks. Increased risk leads to more claims, which in turn leads to increased premiums.
In many ways, insurance borrows from a core element of the treasury skill set, which is risk management. You can’t eliminate risk entirely – you must accept it at some level. So, it’s all about how you structure and manage that risk most effectively.
What I’ve found in the course of this journey is that I’ve spent much more time telling the story of the corporate than I used to. Preparing and presenting the investor materials has enhanced my skill set by requiring me to understand, articulate and contribute to the organisation’s strategy. That has been hugely rewarding.
I’ve also had great opportunities to understand the perspectives not only of our investors, but the brokers, PR advisers and lawyers who advise us on all of our transactions. That has strengthened my knowledge of sustainability investing, what investors are looking for and the workings of the agencies that produce and review ESG ratings.
All of this has boosted my understanding of the total universe of activities that the CFO manages, providing me with an extra toolkit towards entering such a role in the future. It’s a logical progression: after beginning my career as a chartered accountant, I’ve acquired the core treasury skill set, enhanced it with IR – a very specific function that few CFOs are exposed to, but is a major part of that role in a listed firm – and progressively added insurance and other areas.
It’s broadened my horizons. And importantly, it has entailed providing growth opportunities to my team. As I’m necessarily spending less time on treasury activities, that can only really work within the wider function by ensuring that my team can do more of the things I was doing before. So, I’ve set down a development track for them to take on additional responsibilities.
Last year, we were able to promote my assistant treasurer to deputy treasurer, and my treasury analyst to treasury manager – and we’re just hiring a new treasury analyst to come into the team. The whole unit has progressed alongside myself, so it’s a sort of virtuous circle where everyone has been able to grow by stretching their skills.
A perspective refreshed by new experiences is essential – for example, if you approach treasury through the lens of the insurance mindset, the way you think about, describe and communicate particular issues will be different. That’s a real asset for meeting the challenge of telling our brand’s stories to the insurance market in effective, compelling ways to obtain the best possible outcomes.
It also helps us explain internally how we’re expecting insurance costs to increase – and to talk to the business about how we can mitigate those costs through improved management of our claims history. For example, if we can have fewer fires, our insurance premiums will go down. Sounds fairly basic, right? But that’s the crux of it.
Overall, my experience of moving beyond treasury has helped me broaden my understanding, extend my network and support more people within the organisation. All of which are really positive developments.
Matt Packer is a freelance business, finance and leadership journalist