31 October 2019
Minister for Climate Change James Shaw today announced the start of public consultation on a new regime that would require companies to assess and report their climate-related financial risks.
This is an important component of the Government’s Climate Action Plan, and will ensure that companies understand and disclose how climate change will impact both their business and investments.
“A range of organisations, including the Insurance Council of New Zealand, Z Energy and Meridian Energy have suggested that a mandatory regime is needed to ensure consistent, long-term and comparable reporting of climate risk.
“Climate change not only presents physical risks to Aotearoa New Zealand, but increasingly presents financial risks to a large number of our businesses,” said James Shaw.
“The ability for businesses to understand these risks and therefore act upon them will assist New Zealand’s long-term transition to a low-emissions country.”
The discussion document sets out a proposed mandatory regime, the purpose of which is to ensure that material risks and opportunities are routinely considered in business and investment decisions.
The proposals would see companies providing climate change information in addition to financial statements and other information already included in annual reports, to help users make more informed decisions.
“We are seeing increasing demand from the private sector for greater clarity and certainty regarding these types of disclosures. We know that some New Zealand businesses are already exploring these, as is the Reserve Bank,” James Shaw said.
“For example, if we have an airport built on a waterfront that is going to be effected by climate change induced sea-level rise, these risks need to be understood and disclosed, so that both the company and its investors have appropriate information for decision-making.
“Better provision of information will enable financial markets to effectively price in climate change risks and help to safeguard our financial stability. It will also help to identify opportunities, and incentivise further low-emissions and resilient investments.”
The proposed regime would follow the recommended framework of the Task Force on Climate-related Financial Disclosures (TCFD), which is widely acknowledged as international best practice. Many other countries including Australia, Canada, UK, France, Japan, and the European Union, are all working to implement the framework.
“New Zealand needs to be in step with these international trends to ensure we are best prepared for climate change, so we are leaving the most stable environment for our kids and grandkids possible,” James Shaw said.
The announcement was made today at the launch of the Sustainable Finance Forum’s interim report. The Sustainable Finance Forum (the Forum) is an initiative established by Aotearoa Circle to help New Zealand realign its financial system so that it serves the long-term needs of society, the environment and the economy.
Their interim report explores the current state of play and provides recommendations on how to transform New Zealand’s financial system.
The Government’s consultation, jointly run by the Ministry of Business and the Ministry for the Environment opens today and runs until Friday 13 December.