New Zealand will be the first country in the world to require the financial sector to report on climate risks, the Minister for Climate Change James Shaw announced earlier this month.

The announcement said that these changes build on the huge progress the New Zealand Government has made to tackle the climate crisis.

“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. 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 today 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,” James Shaw said.

The new regime will be on a comply-or-explain basis, based on the Task Force on Climate-related Financial Disclosures (TCFD) 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.

“What gets measured, gets managed – and if businesses know how climate change will impact them in the future they can change and adopt low carbon strategies. COVID-19 has highlighted how important it is that we plan for and manage systemic economic shocks – and there is no greater risk than climate change,” James Shaw said.

New Zealand will be the first country to introduce a mandatory climate-related financial disclosure regime.

“Australia, Canada, UK, France, Japan, and the European Union are all working towards some form of climate risk reporting for companies, but New Zealand is moving ahead of them by making disclosures about climate risk mandatory across the financial system,” James Shaw said.

According to the announcement, over the last three years the New Zealand Government has put in place some of the world’s most ambitious climate targets, and made policy and institutional changes to help bend the curve of New Zealand’s emissions downward.

Further information

The new climate reporting requirements will apply to:

• All registered banks, credit unions, and building societies with total assets of more than NZD 1 billion
• All managers of registered investment schemes with greater than NZD 1 billion in total assets under management
• All licensed insurers with greater than NZD 1 billion in total assets under management or annual premium income greater than NZD 250 million
• All equity and debt issuers listed on the NZX
• Crown financial institutions with greater than NZD 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 NZD 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.

ICMIF members with an interest in responsible/sustainable investments can watch recordings of our series of webinars for sustainable investment leaders which took place between Monday 21 and Wednesday 23 September 2020. This series of webinars offers an opportunity to hear best-practice from the mutual/cooperative sector and other leaders in the industry to help ICMIF members increase their sustainability engagement and drive forward leadership in all aspects of responsible investing and sustainable finance. These webinars are specifically aimed at investment, finance and sustainability professionals from within the ICMIF membership but they are suitable to all employees at ICMIF member organisations who have an interest in these topics.