New Zealand Minister for Climate Change James Shaw announced that the country is aiming to become the first in the world to require the financial sector to report on climate risks. Businesses covered by the requirements will have to make annual disclosures, covering governance arrangements, risk management and strategies for mitigating any climate change impacts. The new rules will come into effect in 2023, at the earliest.

Shaw said:

“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.”

The new climate disclosure requirements will apply to registered banks, credit unions, and building societies with total assets of more than $1 billion, managers of registered investment schemes with greater than $1 billion in AUM, licensed insurers with greater than $1 billion in AUM or annual premium income greater than $250 million, all equity and debt issuers listed on the NZX, and crown financial institutions with greater than $1 billion in AUM. Overall, approximately 200 organizations will be covered by the new rules, representing roughly 90% of assets under management in New Zealand. In addition, overseas organisations would also be required to disclose in their New Zealand annual reporting.

According to Shaw, the new regime will be on a comply-or-explain basis, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. If businesses are unable to disclose, they must explain why.

Shaw added:

“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.”