New Zealand has made climate reporting a legal requirement for all large financial organisations. The first country in the world to make such a step, it will now be mandatory for banks, asset managers and insurers to compile and disclose their climate related impact.

Announcing the move, Minister for Climate Change James Shaw said: “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.”

The new regime will be on a comply-or-explain basis, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework with businesses having to make annual disclosures, covering governance arrangements, risk management and strategies for mitigating any climate change impacts. If businesses are unable to disclose, they must explain why.

In total, around 200 organisations will be required to disclose their exposure to climate risk. This includes large Crown Financial Institutions, such as ACC and the NZ Super Fund.

“What gets measured, gets managed – and if businesses know how climate change will impact them in the future they can change and adopt low carbon strategies. COVID-19 has highlighted how important it is that we plan for and manage systemic economic shocks – and there is no greater risk than climate change,” Shaw added. “Australia, Canada, UK, France, Japan, and the European Union are all working towards some form of climate risk reporting for companies, but New Zealand is moving ahead of them by making disclosures about climate risk mandatory across the financial system.”

The new climate reporting requirements will apply to All banks, credit unions, and building societies with total assets of more than NZ$1bn and all managers of registered investment schemes with greater than NZ$1 billion in total assets under management. All insurers with greater than NZ$1bn in assets under management or annual premium income greater than NZ$250m.

Overseas incorporated organisations would also be required to disclose in their New Zealand annual reporting.

Financial entities could be required to make disclosures in 2023 at the earliest.

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