Shemara Wikramanayake is The Australian Financial Review Business Person of the Year after delivering a record 2022 profit and making Macquarie a central player in the global energy transition.
With this award, she will become the third Macquarie bank person, after Nicholas Moore and David Clarke, on The Australian Financial Review’s list of leaders, builders, pioneers and stirrers who have most shaped Australia’s business landscape since 1963, when the Financial Review became a daily publication.
Other bankers and financiers on the list include Sir Ian Potter, Gail Kelly, Bob Joss, Bill Ferris and Don Argus.
Ms Wikramanayake has positioned Macquarie’s banking, funds management and energy trading businesses to capitalise on the estimated $US2 trillion ($2.95 trillion) of inflows into renewables infrastructure over the next five years.
Ms Wikramanayake has dealt herself and Macquarie into the heart of the global finance industry’s efforts to deliberate, coordinate and advocate on climate change.
Macquarie has invested, committed or arranged $65 billion in green projects since 2010. It recently unveiled a partnership with the UN’s Green Climate Fund to get electric vehicles and their charging infrastructure up and running in India.
Ms Wikramanayake has also called for an “orderly transition” to a low-carbon economy, even as Macquarie financed solar, offshore wind and hydrogen projects.
“On the one hand, it’s a massive challenge that we have to meet, and we just don’t have the solutions to get there for 2050 at the moment across all the sectors,” she told The Australian Financial Review Business Summit in March. “On the other hand, if we shut off conventional sources of energy, transport, etcetera, we’re going to have all sorts of disruption.”
In the four years she has been chief executive of Macquarie, earnings have risen 58 per cent to $4.7 billion and net operating income has risen almost 40 per cent to $17.3 billion.
Ms Wikramanayake was chosen as business person of the year by the Financial Review’s judging panel, which comprised Ben Potter, editor, companies and markets; James Dagger-Nickson, deputy editor, companies and markets, columnists James Thomson and Jennifer Hewett; Sally Patten, editor, BOSS; Tony Boyd, Chanticleer columnist; and Michael Stutchbury, editor-in-chief.
“I very much appreciate the committee selecting me, but this recognition reflects the work of many others, including my 19,000 colleagues at Macquarie and the support and collaboration of the clients and partners we work with every day,” Ms Wikramanayake said.
Recognised as the Financial Review’s other business people of 2022 are: Atlassian co-founder and AGL Energy agitator Mike Cannon-Brookes, BHP Group CEO Mike Henry, Fortescue Metals Group executive chairman Andrew Forrest, Woodside CEO Meg O’Neill, and National Australia Bank boss Ross McEwan.
The common theme in this year’s list of leaders, builders, pioneers and stirrers is the energy transition that is becoming the catalyst for profound changes in Australia’s energy regulation, as well as upheaval in corporate governance and capital flows.
Mr Cannon-Brookes, who is a classic corporate stirrer, this year stopped the $140 million demerger of AGL Energy and then successfully nominated four new directors to AGL’s nine-member board, despite only owning about 11 per cent of the company.
He is now in a position to influence the choice of AGL’s next CEO.
Mr Henry has slashed BHP’s exposure to coal and is focusing on future-facing commodities such as copper and potash. He made a $9.6 billion bid for OZ Minerals, known for its copper assets, and brought forward the starting date for the Jansen potash project in Canada by one year to 2026.
Mr Forrest has just spent $4 billion on the country’s largest renewables’ company, CWP Renewables, while stepping up his green hydrogen investments through Fortescue Future Industries, despite heavy turnover of senior executives.
Ms O’Neill is supporting the role of gas in the transition to low-carbon energy, while putting Woodside on a path towards decarbonisation. Mr McEwan is helping to fund the development of green energy projects.
Mr Forrest and Ms Wikramanayake were the only top 20 CEOs to make their presence felt at the COP27 climate talks in Egypt in November. Ms Wikramanayake says she visited nine countries in 2022 – the United Kingdom and eight other countries in the Americas, Europe, Middle East, North Asia, South Asia and Africa.
When asked to reflect on 2022, Ms Wikramanayake said the headwinds that business faced this year would pick up in 2023 and result in a global recession.
“As the world started to come back from the unprecedented global lockdowns of the COVID pandemic, 2022 brought new challenges, not seen for many decades, of surging inflation, interest rates and energy prices, together with geopolitical tensions on a global scale,” she said.
“While the consensus view is that we are likely to see a global recession in 2023 as central banks lift interest rates to rein in inflation, the expectation is that it will be neither deep nor long-lasting in many regions, and in this regard Australia is considered to be relatively well-positioned.
“Through this, we remain focused on addressing longer term global structural challenges where we can bring our deep specialist expertise, and partner with the complementary expertise of others, to bring value-adding solutions to investors and the communities where we invest their capital.
“These challenges include climate change response, digitisation of every sector, and urbanisation investment to support a greatly expanded global population.
“Here in Australia, we are applying this approach by working with clients, investors and communities to support an orderly energy transition, enhance our leading digital banking offering, deliver infrastructure and help grow future industries in areas such as critical minerals and services.”
Shareholders in Macquarie have had a tough year, with the stock down 20 per cent as the market adjusted the amount it was willing to pay for exposure to financial markets.
However, those who backed Ms Wikramanayake following her appointment as CEO in December 2018 would have done well, as the stock is up 60 per cent.
The two stellar divisions at Macquarie under Ms Wikramanayake’s leadership have been Macquarie Asset Management and Commodities and Global Markets.
Since 2018, Macquarie Asset Management has recorded a 40 per cent surge in assets under management to $796 billion. Over the same period, commodities and global markets have lifted their contribution to profit by 32 per cent to $1.99 billion.
Ms Wikramanayake faces her own energy transition challenge within Macquarie, because in a world that is less carbon intensive there will be significantly less trading of oil and gas by the commodities and global markets division.
The scale of this decarbonisation adjustment at Macquarie can be seen from the fact that in the six months to September 30, 2022, about 66 per cent of Macquarie’s net interest and trading income came from the commodities and global markets business.
Following the latest interim results, Ms Wikramanayake told the Financial Review that the growing scale and reach of Macquarie’s specialist funds allowed it to raise money at a much higher run rate than it had previously.
In the six months to September, it raised $22.5 billion in funds with different strategies including real estate, private credit and infrastructure.
Thanks to co-investment alongside investors, Macquarie can pursue larger transactions. Macquarie has just finished raising money for its seventh European infrastructure fund, its sixth US infrastructure fund and its first energy transition fund.
A feature of Ms Wikramanayake’s tenure at Macquarie has been the step-up in the bank’s investment in technology, compliance and regulatory projects.
“Our investment in operating expenditure has gone from a $1.3 billion run rate annualised to about a $2.5 billion run rate,” she told the Financial Review in October.
“That means we’re putting $1.2 billion more to work every year in opex [operating expense], in making sure we have a robust, resilient platform.
“We are responding to things like regulatory projects, and also technology more generally, as we try to upgrade our platform and deal with things like cyber risk.
“Non-financial risks obviously have become material as well. So, we’re responding to that. Climate is one area, behavioral risk is another, all these sorts of things that the community expects businesses to deliver on.”
Ms Wikramanayake said Macquarie had put significant effort into ensuring it had diversified its portfolio to ensure it would not be affected by the “idiosyncratic” things that can happen in financial markets, such as the meltdown in the UK bond market in October.
The author holds shares in Macquarie Group and Fortescue Metals Group.
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