New Zealand Climate-Related Financial Disclosures

The New Zealand External Reporting Board (XRB) is an independent Crown Entity that provides assurance, oversight, standards and guidance on the quality and consistency of external reporting in New Zealand, such as financing, auditing, sustainability and climate reports. 

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The board has recently published the New Zealand Climate Standards. The fundamental goal of Aotearoa New Zealand Climate Standards is to help direct capital towards activities that align with transitioning to a climate-resilient, low-emission future. These guidelines will be enforced as of 1st January 2023 and will be enforced by the Financial Markets Authority. The standard is made up of three sections:

• NZCS1: Disclosure
• NZCS2: Adoption
• NZCS3: General requirements

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The standard requires public companies to disclose their greenhouse gas (GHG) emissions per the Greenhouse Gas Protocol Corporate Standard and to set targets for reducing their emissions. Companies must also inform their climate change governance, strategy and risk management, and plans for transitioning to a low-carbon economy. The standard also encourages reporting frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the New Zealand Climate Change Framework. Companies must report on their progress in meeting these targets and must prepare an annual progress report. Companies are also required to provide additional information to make public, such as the impact of climate change on their business. The standard aims to provide transparency and accountability for companies and to ensure that companies are taking action to reduce their emissions and transition to a low-carbon economy.

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Who

Climate Reporting Entities (CRE) must adopt the new climate standards. CRE are organisations that are required by law to report their greenhouse gas emissions, climate-related risks, and opportunities to the public. Around 200 entities will have to make these disclosures, with the criteria expanding in time. These criteria for reporting entities include:

• Registered banks, credit unions, and building societies with total assets of over $1 billion. 
• Managers of registered investment schemes with more than $1 billion in total assets under management. 
• Licensed insurers with more than $1 billion in total assets or annual premium income of more than $250 million. 
• Listed issuers of quoted equity securities with a joint market price exceeding $60 million. 
• Listed issuers of quoted debt securities with a combined face value of mentioned debt exceeding $60 million. 
• Crown Financial Institutions have over $1 billion in total assets under management.
• Registered investment scheme managers will be required to make disclosures on a fund-by-fund basis.

The magnitude of these entities means that the mandatory reporting will have a ripple effect on many small and medium business suppliers. The entities will require more detailed information and data on the products they purchase, and thus, numerous businesses will be affected indirectly.

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NZCS1: disclosures

NZCS1 outlines the climate-related disclosure requirements for Governance, Strategy, Risk Management, Metrics and Targets and the assurance requirements for greenhouse gas emissions disclosures. This standard aims to allow primary users to evaluate the advantages of how entities deal with climate-based risks and opportunities and then make decisions based on those evaluations. 

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NZCS2: Adoption

The Aotearoa New Zealand (NZ) Climate Standard 2 guides organisations in reporting climate-related risks and adopting opportunities. It is designed to provide organisations with a framework to identify, assess and report on their climate-related risks and opportunities consistently and transparently. 

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Adoption provisions include 

• Current financial impacts
• Anticipated financial impacts
• Transition planning
• Scope 3 GHG emissions
• Comparatives for scope 3 GHG emissions
• Comparatives for metrics
• Analysis of trends

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NZCS3: General Requirements

NZCS3 sets up principles and basic requirements necessary to ensure high-quality climate-related disclosures.

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Principles include

• Relevance
• Accuracy
• Consistency
• Balance
• Understandability
• Coherence

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XRB will release supporting guidance in January 2023 but has provided a list of resources to help get companies started in the meantime. 

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Getting started

Even if you're not included in the compulsory entities, the criteria are likely to expand, so it is crucial to get ahead! Here are some tips to help prepare: 

1. Understand the climate movement's terminology and familiarise yourself with the key materials from the TCFD standards. 
2. Measure your carbon footprint
3. Form alliances with like-minded individuals and groups to start the discussion.

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Summary

The New Zealand Climate-Related Disclosures initiative is an essential step in the right direction towards better understanding the impacts of climate change on business and industry. By providing businesses with the tools to understand and disclose their climate-related risks and opportunities, the initiative is helping to ensure that New Zealand businesses are better equipped to respond to a changing climate. The initiative will also help to ensure that the New Zealand public is informed about the risks and opportunities associated with climate-related activities and that businesses are held accountable for their actions. Ultimately, this will help to ensure that New Zealand is better prepared for the challenges of climate change.

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