Climate-related financial disclosures: Bill introduced to Parliament and timeline for Standards released
The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill (Bill), which will introduce the Climate-Related Financial Disclosures regime, has been introduced to Parliament. You can read the Bill here. The Bill has passed its first reading and has been referred to the Economic Development, Science and Innovation Committee. The Select Committee’s report is due on 16 August 2021.
The Bill will make climate-related disclosures mandatory (on a disclose or explain basis) for around 200 private sector entities in New Zealand, including:
all equity and debt issuers listed on the NZX;
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.
Letters of expectation dated March 2021 released by the Minister of Finance state that Crown financial institution’s climate reporting should be in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework, but those entities are not referred to in the Bill. We think they should be, as should government departments, and crown and local authority owned businesses, some of which are major emitters and/or compete with listed entities.
LCANZI will be making a submission to Parliament on the Bill – a key focus will be to encourage wider coverage of the regime.
The XRB has also released the timeline for development and implementation of the Reporting Standards for the regime. The draft timeline for the Standards means that the first tranche of Climate-Related Financial Disclosures will be in 2023. This seems like a long way away, but is likely a realistic timeframe to ensure proper consultation occurs.
LCANZI will seek opportunities to consult with the XRB on the Standards to ensure that they encourage transparent and robust standards. Better standards will likely encourage organisations who have to make the disclosures to improve their emissions profile and take action on climate change.
Despite the long timeframe for implementation of the regime, all organisations (even those that will not be covered by the regime) can start voluntarily considering their emissions profile and the potential effect of climate change on their organisation. Given the current state of knowledge about climate change risks, our view is that all directors have an obligation (even without compulsory requirements) to at least consider whether climate risks are potentially material to their company, and to take steps to manage such risks.
MBIE and the Sustainable Business Network have created an outstanding toolbox for organisations to help them consider how to reduce emissions: https://www.tools.business.govt.nz/climate/.
Click here to read our factsheet on Climate-Related Financial Disclosures.