Publicly listed companies, insurers, banks, non-bank deposit takers, and investment managers in New Zealand will now have to make their climate-related disclosures public after the government made reporting mandatory.
Currently, around 40 percent of NZX-listed companies have climate-related risks reported in their year-end company financial statements. The changes will impact around 200 organisations.
According to the Ministry for the Environment’s website, the legislation was introduced as part of New Zealand’s journey towards a low-carbon future and for businesses to have a good understanding of how climate change will impact them, both in terms of risks and opportunities.
The legislation was brought in by the previous government in 2021, where then-Climate Change Minister James Shaw said affected companies would have to comply or explain why they were not reporting on climate risk.
The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act is the basis for amendments to the Financial Markets Conduct Act 2013 (FMC Act), the Financial Reporting Act 2013, and the Public Audit Act 2001.
“Today is another step on the journey this government is taking towards a low carbon future for Aotearoa New Zealand and a cleaner, safer planet for future generations,” Mr. Shaw said in 2020.
“Many large businesses in New Zealand do not currently have a good understanding of how climate change will impact on what they do.
“The changes I am announcing will bring climate risks and resilience into the heart of financial and business decision-making. It will ensure the disclosure of climate risk is clear, comprehensive and mainstream,”
The new law means affected companies must provide the information that aims to help “New Zealand meet its international obligations and achieve its target of net zero carbon by 2050”- according to a ministerial release.
By enhancing reporting, the ministry said the New Zealand financial system will become more resilient to the impacts of climate change, as outlined in the National Climate Change Risk Assessment.
Climate-specific activities that have taken place from Jan. 1, 2023, must now be reported to increase transparency and ensure that the effects of climate change are routinely considered in business, investment, lending, and insurance underwriting decisions.
New Zealand is believed to be leading the pack internationally by implementing a corporate climate reporting framework.
At the 2021 United Nations Climate Change Conference in Glasgow, the International Sustainability Standards Board (ISSB) was formed to provide a “global baseline” of sustainability disclosures.
According to the ISSB, new sustainability standards have the international support of the G7, the G20, the International Organization of Securities Commissions (IOSCO), the Financial Stability Board, African Finance Ministers and Finance Ministers, and Central Bank Governors from more than 40 jurisdictions.’
Along with establishing a global baseline for disclosures, the ISSB’s key objectives aim to facilitate interoperability with jurisdiction-specific disclosures pertinent to broader stakeholder groups, thus providing a clearer, more accessible view of a company’s sustainability information.
