New Zealand will be the first country in the world to require the financial sector to report on climate risks, according to an announcement by Minister for Climate Change James Shaw.
The new regime, which will come into effect in 2023 at the earliest, will be on a comply-or-explain basis. This is based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, which, according to the New Zealand Government, is widely acknowledged as international best practice.
Businesses covered by the requirements are compelled to make annual disclosures, covering governance arrangements, risk management and strategies for mitigating any climate change impacts. In the event businesses are unable to disclose, they will be required to explain why.
In total, around 200 organisations will be required to disclose their exposure to climate risk, including large Crown Financial Institutions, such as the ACC and the NZ Super Fund. All licensed insurers with greater than $1 billion in total assets under management or annual premium income greater than $250 million are included.
The Financial Markets Authority will be responsible for independent monitoring, reporting and enforcement.
According to Shaw, other governments, such as Australia, Canada, the UK, France, Japan, and the European Union are working on climate risk reporting regimes for businesses, but New Zealand is taking the move further, making disclosures about climate risk mandatory across the financial system.
“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,” said Shaw.
“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.”