The Productivity Commission’s 2018 Low Emissions Economy report noted that climate-related financial disclosures can be a powerful mechanism to focus reporting entities on the impacts of climate change on their own activities, and that disclosure can enable investors to make decisions across investment opportunities that accurately reflect the climate risk of those choices.
Some organisations in New Zealand are already expected to disclose climate-related financial information and others are reporting voluntarily in a rapidly evolving space. Following early adopters overseas, the government has signalled that it intends to implement a mandatory disclosure regime.
The Ministry for the Environment and the Ministry of Business, Innovation and Employment consulted in December 2019 on introducing a mandatory, principles-based climate-related financial disclosure regime (on a “comply or explain” basis) for listed issuers, banks, general insurers, asset owners and asset managers.
It has been proposed that the Task Force on Climate-related Financial Disclosures (TCFD) reporting framework could be used as a default framework. Other suitable frameworks such as Integrated Reporting and the Global Reporting Initiative could also be used.
The TCFD is mainly concerned with the impacts of climate change on companies rather than impacts of the companies on the environment.
In 2015, the Financial Stability Board established the Task Force on Climate-related Financial Disclosures and asked it to develop a set of voluntary climate-related financial disclosures that companies could use when providing information to stakeholders.
The TCFD identified two types of climate-related risks:
The TCFD recommends 11 areas of disclosure within four thematic areas:
In our submission on the proposed new regime, we agreed that the TCFD framework would be appropriate for climate-related financial disclosures in New Zealand. We note that the proposed “comply or explain” approach to implementing the TCFD framework can support good governance and provides flexibility and proportionality for organisations to report in a way that is appropriate and meaningful relevant
to their circumstances. We also:
Corporate reporting is continuing to change and there are many different reporting frameworks in place globally. It is important that any mandatory
climate-related financial disclosure regime
in New Zealand provides a foundation framework that:
For further information on how organisations can approach climate-related disclosures see:
The Climate Change Response (Zero Carbon) Amendment Act 2019 enables the Climate Change Minister and the new Climate Change Commission to request certain organisations (eg public service organisations, Local Authorities, SOEs, Crown Entities (excluding school boards) and Lifeline Utilities) to provide information on climate change adaptation, which is relevant to National Adaptation Plans produced by the government.
This article is featured in Boardroom issue Feburary March 2020