Te Whanganui a Tara – Aotearoa has become the first country in the world to introduce a law that requires the financial sector to disclose the impacts of climate change on their business.
The government says it is important that every part of New Zealand’s economy is helping cut emissions and transition to a low carbon future. New legislation ensures 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 Aotearoa has a can pave the way for other countries to make climate-related disclosures mandatory.
Climate change will have a profound impact on businesses all over Aotearoa. There are activities and assets that businesses are involved in that will not hold their value in a low carbon world, simply because they emit too much climate pollution and contribute to the climate crisis.
Similarly, there are technologies and activities that will cut emissions and become hugely valuable to the low carbon economy of the future.
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.
The legislation will make climate-related disclosures mandatory for around 200 organisations, including most listed issuers, large banks, licensed insurers and managers of investment schemes.
Once passed, disclosures will be required for financial years commencing in 2022, meaning that the first disclosures will be made in 2023.
The four main elements to the Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill, which will have its first reading this week are:
- It introduces mandatory climate-related disclosures for most listed issuers, along with large banks, licensed insurers and registered managers of investment schemes.
- It requires the disclosures to be made in accordance with climate standards that will be issued by the External Reporting Board, or XRB.
- The Financial Markets Authority will be responsible for the independent monitoring and enforcement of the relevant reporting entities’ compliance with the new reporting standards.
- The XRB will be able to issue guidance material on environmental, social and governance reporting and other wider aspects of non-financial reporting.
