New Zealand’s financial firms may soon be required to make disclosures on how climate change is impacting their investments and how they are managing climate-related risks and opportunities. This follows the introduction of new legislation that would require institutions like banks, insurance and investment firms to report on their climate related investments.
Minister for Climate Change, James Shaw, stated that the country could not achieve net-zero carbon emissions by 2050 unless the financial sector knew the impact their investments were having on the climate. He further reiterated that the disclosures would help businesses identify high-emitting activities. They would also be more aware of opportunities to act on climate change and emerging low carbon technologies.
The law is expected to caution against high-carbon investments at a time when the government is on track to meet its climate targets. Shaw added that it would bring climate risk and resilience into the core of financial and business decision-making.
The Financial Sector Amendment Bill is soon to have its first reading in parliament and is expected to pass in time for disclosures to start being required from next year. This means the first reports should be released in 2023. The reporting will be guided by the Task force on Climate-related Financial Disclosures (TCFD) framework.
This reporting would be mandatory for about 200 of the largest local and international organisations in the sector. More precisely, all banks that have total assets exceeding NZ$1 billion, insurance firms with over NZ$1 billion in total assets under management, and all debt and equity issuers that are listed on the stock exchange.
This proposed law has been in the making for a while. In September 2020, the government had confirmed intentions to make the financial sector comply with such reporting. Those that did not disclose would be required to explain why.
Commerce and Consumer Affairs Minister, David Clark, said that New Zealand would be the first country in the world to introduce such a law, leading other countries to makes similar climate-related disclosures mandatory. He added that many businesses were faced with substantial physical and transitional risks that were climate related. Though some had already begun publishing reports on this impact on their operations, strategies, and finances, there is still a long way to go.
The new law would be in keeping with the government’s focus on introducing policies that would lower emissions. Prime Minister, Jacinda Ardern, had promised during her second term to ensure the public sector was carbon neutral by 2025. To help achieve this goal, the government has committed to buying only electric or hybrid vehicles and phase out coal-fired boilers in public service buildings.