Press release: Climate change - New Zealand’s next opportunity to lead the world?

With New Zealand’s response to COVID-19 being applauded around the world, now is the time to show similar leadership in climate change policy and action says Lawyers for Climate Action NZ Inc (LCANZI). 

LCANZI President, Jenny Cooper QC, is calling on the Government to announce its plans for introducing mandatory climate-related financial disclosure before the general election – endorsing the sentiment that “climate change remains the nuclear-free issue of our generation”. 

LCANZI strongly supports the proposed introduction of the TCFD climate-related financial disclosure requirements in New Zealand as well as the introduction of a mandatory “comply-or-explain” disclosure regime based on the TCFD framework.

The TCFD framework provides a useful, and internationally recognised, framework for businesses to understand their exposure to climate change risks, as well as the contribution they are making, so they can adapt and be resilient through both physical and transitional impacts. These impacts are affecting businesses now, with new regulations and consumer preferences applying ahead of the physical changes.

However, Jenny Cooper QC says the regime needs to apply more broadly than originally proposed if New Zealand wants to lead the world on this global issue. 

“To make a real difference, the proposed disclosure regime must apply to all large businesses and other entities, whoever owns them, from the outset, rather than being limited to listed companies, licensed banks and insurers.” says Ms Cooper.

“It would be arbitrary and counterproductive for the disclosure regime to apply to certain entity types and not others. In contrast to many other developed countries, New Zealand businesses tend to be privately owned, co-operatives, subsidiaries of multinationals or government-owned. Public entities and NGOs also need to understand their exposure and contribution to climate change just as much as the private sector. 

“The ownership structure of an organisation is irrelevant to whether it poses a climate risk, or whether it will be disrupted.”

It is not only investors who should be interested in the carbon impact and climate change preparedness of an entity. Employees, suppliers, lenders and customers are also key stakeholders with a vital interest. 

“Without a broad disclosure regime, none of these stakeholders can assess or compare how the entities they work for or deal with will fare,” says Ms Cooper. 

While LCANZI is calling for the disclosure regime to apply broadly to all entity types, it recognises the need to ensure the entities subject to it have sufficient resources for compliance.

LCANZI proposes an exemption (based on the test for “large” overseas companies for the purposes of financial reporting under the Companies Act 1993 and Financial Reporting Act 2013) in its submission on the Governments’ proposal.

The exemption would apply if the total assets of the entity (including its subsidiaries) is equal to or less than $20 million or the total revenue of the entity (including its subsidiaries) is equal to or less than $10 million.

“If the regime is too broad at the outset, it may result in large scale non-compliance, and in turn, unravel confidence in the regime,” says Ms Cooper. 

“Let’s get the big end of town into TCFD disclosure, to build up the expertise in complying, and then it can gradually be expanded. 

“The key thing is to ensure that we don’t lose sight of climate risk as we work towards economic recovery and that crucial policy initiatives such as climate-related financial disclosure remain high on the Government’s agenda.”

The discussion paper was released by the Ministry for Environment and the Ministry of Business, Innovation and Employment in October 2019 for consultation. LCANZI submitted its views on 13 December 2019, along with 70 other organisations but is still waiting for the Government to announce its policy decisions.  

A copy of the discussion paper and consultation document can be found here, and LCANZI’s submission is available here.