LexBlog: New Zealand Introduces Mandatory Climate Disclosure Law

On April 13, 2021, the Government of New Zealand announced the introduction of legislation that would make climate-related disclosures aligned with the Recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD) mandatory for certain financial services organizations, as well as all equity and debt issuers listed on the NZX. This mandatory reporting regime is both robust and broad – the first of its kind – and other countries around the world may soon follow suit.

The Government views the proposed law as a significant step toward realizing New Zealand’s ambitious climate agenda. According to Climate Change Minister James Shaw, “We simply cannot get to net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate. This law will bring climate risks and resilience into the heart of financial and business decision making.”

We summarize key aspects of the proposed law in this Blog Post.

 

Covered Entities

The law would require approximately 200 entities in New Zealand to disclose climate-related information, including:

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

Reporting Requirements

New Zealand’s External Reporting Board (XRB) will issue disclosure standards in line with the TCFD Recommendations. The TCFD Recommendations require climate-related disclosures in four principal areas:

  • governance;
  • strategy;
  • risk management; and
  • metrics and targets.

The XRB will consult on specific reporting standards, while New Zealand’s Financial Markets Authority will be responsible for independent monitoring, reporting and enforcement of the new regime.

Implementation Timeline

The proposed law will be introduced through an amendment to the Financial Markets Conduct Act (2013). If approved by Parliament, financial entities could be required to make climate-related disclosures with respect to the 2022 financial year in 2023, at the earliest. The proposed law will receive its first reading in Parliament this week.