New Zealand first in the world to require climate risk reporting
New Zealand will be the first country in the world to require the financial sector to report on climate risks.
The new regime will be on a comply-or-explain basis, based on the Task Force on Climate-related Financial Disclosures framework, which is widely acknowledged as international best practice.
Businesses covered by the requirements will have to make annual disclosures, covering governance arrangements, risk management and strategies for mitigating any climate change impacts. If businesses are unable to disclose, they must explain why.
In total, around 200 organisations will be required to disclose their exposure to climate risk. This includes large Crown Financial Institutions, such as ACC and the NZ Super Fund.
New Zealand will be the first country to introduce a mandatory climate-related financial disclosure regime.
The new climate reporting requirements will apply to:
- All registered banks, credit unions, and building societies with total assets of more than $1 billion
- All managers of registered investment schemes with greater than $1 billion in total assets under management
- All licensed insurers with greater than $1 billion in total assets under management or annual premium income greater than $250 million
- All equity and debt issuers listed on the NZX
- Crown financial institutions with greater than $1 billion in total assets under management, such as ACC and the NZ Super Fund
Overseas incorporated organisations would also be required to disclose in their New Zealand annual reporting.
The $1 billion threshold will make sure about 90 per cent of assets under management in New Zealand are included within the disclosure system.
The External Reporting Board (XRB) will develop one or more reporting standards, which entities may either comply with, or if they do not comply, explain why not.
The Financial Markets Authority will be responsible for independent monitoring, reporting and enforcement.
If approved by Parliament, financial entities could be required to make disclosures in 2023 at the earliest.