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Climate-related disclosures, are you ready to report?

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Late last year the Government announced its intent to make climate-related financial disclosures mandatory for all publicly listed companies and large financial services organisations.

This includes large insurers, banks, non-bank deposit takers and investment managers.

According to the Ministry for the Environment the purpose of mandatory climate-related disclosures is 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; and
  • lead to more efficient allocation of capital, and help smooth the transition to a more sustainable, low emissions economy.

What will be required?

The Bill is currently before Parliament but impacted organisations could be required to make disclosures as early as 2023.

The External Reporting Board (XRB) is responsible for developing the reporting standards  which are expected to closely align with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

In order to meet the disclosure requirements being proposed, businesses will have to demonstrate how they embed environmental and social practices through their strategies and risk frameworks into the core of board level decision making.

These disclosure requirements are likely to change the way companies evaluate  business decisions, including the way they gather information and present business cases or investment returns.                     

What can be done now?

Even as the proposed disclosure requirements are developed, there is still an obligation for businesses to think about this now.

Organisations must still meet requirements under existing NZ IFRS standards (such as the impact of environmental risk on your impairment testing under NZ IAS 36, provisions NZ IAS 37, such as cost of remediating environmental damage and if your business model presents risk of being unsustainable, going concern).

What will the proposed changes mean?

When they come into force, these reporting requirements will drive greater transparency around climate change related risks and opportunities, helping markets to more accurately value climate risk, and supporting New Zealand’s transition to a low emissions future.      

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About Author

Victoria Ashplant

Victoria Ashplant is a PwC Director based in the Waikato office Email: victoria.j.ashplant@pwc.com