Legislation Introduced in New Zealand
In the October 2020 edition of Accounting Alert we reported on the New Zealand Government’s intention to require the disclosure of climate-related information by some large New Zealand businesses.
That intention has now been brought to life by the Government’s introduction of the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill (“the Bill”) to Parliament on 12 April 2021. The Bill will, if enacted, amend the Financial Markets Conduct Act 2013, the Financial Reporting Act 2013 and the Public Audit Act 2001.
The Bill is currently before the Economic Development, Science and Innovation Select Committee, which is due to report back to Parliament on 16 August 2021.
Reasons for introducing the Bill
The Ministry of Business, Innovation and Employment (“MBIE”) notes that the majority of large New Zealand entities provide limited or no information on what climate change might mean to them, while those that are reporting such information do so in inconsistent ways. MBIE considers that this information deficit is driving what the Productivity Commission termed, in its Low Emissions Economy report, “an ongoing and systemic overvaluation of emissions-intensive activities”.
MBIE notes that the goals of mandatory climate-related disclosures are to:
- Ensure that the effects of climate change are routinely considered in business, investment, lending and insurance underwriting decisions
- Help climate reporting entities better demonstrate responsibility and foresight in their consideration of climate issues
- Lead to more efficient allocation of capital and help smooth the transition to a more sustainable, low emissions economy.
In addition, mandatory reporting of climate-related disclosures would help New Zealand meet its international obligations, achieve its target of zero carbon by 2050 and address climate change risks outlined in the National Climate Change Risk Assessment.
What the Bill will require
If enacted, the Bill will require climate-related disclosures to be made from 2023 reporting dates onwards by approximately 200 entities in New Zealand:
- All registered banks, credit unions, and building societies with total assets of more than $1 billion
- All managers of registered investment schemes with greater than $1 billion in total assets
- All licensed insurers with greater than $1 billion in total assets under management or annual premium income greater than $250 million
- All equity and debt issuers listed on the NZX.
Managers of registered investment schemes would be required to make disclosures on a fund-by-fund basis.
Reporting would be against one or more standards that would be issued by the External Reporting Board - these standards would be developed in line with the recommendations of the Task Force on Climate-related Financial Disclosures, which are structured around four thematic areas that represent core elements of how organisations operate:
- Risk management
- Metrics and targets.
In coming editions of Accounting Alert we’ll keep you up to date with the progress of the Bill, as well as continuing our examination of various aspects of the complex and fast moving world of extended external reporting.
For more information on the above, please contact your local BDO representative.
This publication has been carefully prepared, but is general commentary only. This publication is not legal or financial advice and should not be relied upon as such. The information in this publication is subject to change at any time and therefore we give no assurance or warranty that the information is current when read. The publication cannot be relied upon to cover any specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in New Zealand to discuss these matters in the context of your particular circumstances.
BDO New Zealand and each BDO member firm in New Zealand, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this article nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded. Read full Disclaimer.