Financial markets reform: turning down the liability, turning up the signal

The Institute of Directors and Chapter Zero New Zealand support the proposed changes in the Amendment Paper to the Financial Market Conduct Amendment Bill, particularly the removal of director liability for climate-related disclosures under both the Bill and the Fair Trading Act 1986. The submission highlights that this liability has been a longstanding concern, especially given the complexities and forward-looking nature of climate reporting. Imposing personal criminal liability on directors has led to increased compliance costs and constrained disclosure quality, as observed in the first reporting cycle.

The removal of this specific liability aligns with a more effective approach to climate-related governance. We recommend relying on the foundational duties of directors outlined in the Companies Act 1993 and supporting sound governance through established resources like the Four Pillars of Governance Best Practice and the Chapter Zero Board Toolkit. This approach is consistent with other policy areas where director liability has created unintended negative outcomes without improving compliance or safety.

The submission reinforces that existing directors’ duties – such as acting in good faith, exercising due diligence and serving the best interests of the company – provide a sufficient framework to ensure meaningful disclosures. Removing specific climate disclosure liability is expected to encourage better quality, more valuable reporting, whether mandatory or voluntary. 

Read the submission