Disclosures will be required for financial years commencing in 2022 for around 200 organisations.
A new law has been introduced in New Zealand’s Parliament that will require the financial sector to disclose the impacts of climate change on their business and explain how they will manage climate-related risks and opportunities.
New Zealand’s government announced its intent to become the first country in the world to require the financial sector to mandatorily report on climate risks in September 2020.
On Tuesday (13 April), Commerce and Consumer Affairs Minister David Clark announced the introduction of the new law into Parliament.
“It is important that every part of New Zealand’s economy is helping us cut emissions and transition to a low carbon future,” Clark said. “This legislation ensures that financial organisations disclose and ultimately take action against climate-related risks and opportunities.”
“Becoming the first country in the world to introduce a law like this means we have an opportunity to show real leadership and pave the way for other countries to make climate-related disclosures mandatory.”
Requiring the financial sector to disclose the impacts of climate change will help businesses identify the high-emitting activities that pose a risk to their future prosperity, as well as the opportunities presented by action on climate change and new low carbon technologies, said Climate Change Minister James Shaw.
The Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill will make climate-related disclosures mandatory for around 200 organisations which meet a NZD 1 billion asset threshold – including most listed issuers, large registered banks, licensed insurers and managers of investment schemes.
Once the bill is passed, disclosures will be required for financial years commencing in 2022, meaning that the first disclosures will be made in 2023.
The XRB (External Reporting Board), an independent Crown Entity responsible for accounting and auditing & assurance standards in New Zealand, will prepare, consult on and issue new reporting standards for businesses required to disclose.
Reporting will be based on the TCFD framework, which is widely acknowledged as international best practice.
Under the new law, elements of the disclosures relating to greenhouse gas emissions would be required to have independent assurance.
The FMA (Financial Markets Authority) will be responsible for the independent monitoring and enforcement of the relevant reporting entities’ compliance with the new reporting standards.
“We simply cannot get to net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate,” Shaw said. “This law will bring climate risks and resilience into the heart of financial and business decision making.”
The Bill will receive its first reading this week.
More information on the planned climate reporting regime is available here.
Separately, Minister Shaw announced a range of new clean energy projects in schools, tertiary institutions, hospitals and other government agencies, as part of New Zealand’s pledge to become carbon neutral by 2025.
“The projects will reduce carbon emissions by around 26,000 tonnes over the next ten years, equivalent to taking over 1,000 cars off the road,” Shaw said.
The latest annual inventory of New Zealand’s greenhouse gas emissions shows that both gross and net emissions increased by 2 percent in the 12 months from the end of 2018 – mainly due to emission increases in manufacturing industries and construction, public electricity and heat production.