FMA unveils scenario analysis information for CRD regime

Tool will help climate reporting entities in constructing scenarios for resilience

FMA unveils scenario analysis information for CRD regime


By Kenneth Araullo

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko has published its scenario analysis information sheet to help climate reporting entities (CREs) in meeting their obligations under the Climate-Related Disclosures (CRD) regime.

This information sheet explains the regulator’s expectations for scenario analysis disclosures set out in the External Reporting Board’s (XRB) Aotearoa New Zealand climate standards. Scenario analysis is a strategic tool where CREs can construct plausible pathways leading to different situations and analyse how resilient their current business model and strategy is when placed under these scenarios.

In a news release, FMA CRD manager Jenika Phipps said that the regulator recognizes that climate-related scenario analysis is a new concept for most firms in New Zealand.

“This information sheet explains scenario analysis as an important tool to develop an exploratory approach for considering significant uncertainties, about the scale and speed of physical and transitional climate-related impacts, that are likely to play out in the future,” Phipps said. “Using climate-related scenario analysis will enable entities to better understand the inter-related dynamics of climate change, prepare for an uncertain future, and ultimately consider how to improve their long-term resilience.”

Scenario analysis is one of the requirements under the strategy pillar of the CRD reporting regime alongside risk management, governance, and metrics and data. This new guideline follows the CRD documents released by the FMA last June.

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