Macquarie Group's CEO, Shemara Wikramanayake, has reaffirmed the company's dedication to the green energy transition, despite potential changes in climate policies, including those that could arise under a Donald Trump presidency.
During the investment group's annual meeting on Thursday, Macquarie reported that its first-quarter performance was largely consistent with the same period last year. However, the market perceived the update as underwhelming, resulting in a 3.9% drop in the company's share price.
Macquarie is a significant player in the renewable energy sector, a focus area that could be impacted by a change in the US administration. If Trump wins the upcoming presidential election, his Project 2025 blueprint includes plans to repeal the Inflation Reduction Act, which has significantly boosted climate action under the Biden administration through substantial tax incentives for clean energy and technology development.
When questioned about the potential impact of a Trump presidency, Wikramanayake acknowledged that the next US administration might have "some impact" but emphasized the company's commitment to working with governments over the long term. "We think that’s a multi-decade response that has a long way to play," she stated.
Green Ambitions and Renewable Energy Initiatives
Wikramanayake also highlighted the company's ongoing interest in green hydrogen, despite the investment requiring government support to be financially viable. This comes shortly after mining giant Fortescue announced it was scaling back its ambitions to become a major producer of the clean fuel.
"The world needs a source of energy with low or no emissions to complement wind or solar, and green hydrogen has to be one of those options," Wikramanayake said. She added that initial investments in green hydrogen would not yield financial returns unless supported by government incentives, citing the Inflation Reduction Act in the US as a significant enabler for such projects.
Macquarie has a robust commitment to renewable energy, with 110 GW of green energy assets under management, including 12 GW currently operating, 3 GW under construction, and 95 GW in development. In FY24, Macquarie invested or arranged $A2.4 billion in green energy assets. The firm is dedicated to reaching net zero emissions in its operations (Scope 1 and 2) by FY25 and is developing strategies for Scope 3 emissions. Moreover, Macquarie sourced the equivalent of 100% of its global electricity consumption from renewable sources in FY24.
Macquarie's Climate Strategy:
Addressing shareholders in Sydney, Macquarie's chair and former Reserve Bank governor, Glenn Stevens, noted that the banking group delivered a return on investment of 10.8%, slightly below its typical target. He attributed this to quieter financial conditions that presented fewer opportunities and reduced demand for services. Over the past five years, Macquarie has averaged around a 15% return for shareholders.
Stevens also commented on the delicate situation faced by central banks globally regarding interest rates. While inflation has decreased, questions remain about whether it has cooled sufficiently. "Economies have probably been a bit more resilient than most would have expected. [But] there are signs of slowing, certainly in the US and here," he observed.
Jefferies equity analyst Matthew Wilson described the start of Macquarie's new financial year as "soft" compared to market expectations, though it aligned with the company's own projections.
Wikramanayake reported that Macquarie Asset Management, which contributed 18% of the group's net profits, managed $915 billion in assets as of the end of June, a 2% decrease from March.