In September 2020, the Government announced its intention to implement mandatory reporting on climate risks and tasked the XRB with developing reporting standards to support the new reporting regime.
Climate-related disclosures will be mandatory for large listed companies with a market capitalisation of more than $60 million; large licensed insurers, registered banks, credit unions, building societies and managers of investment schemes with more than $1 billion in assets; and some Crown financial institutions (via letters of expectation). Subject to parliamentary approval, these entities could be required to make disclosures alongside wider year end reporting in 2023 at the earliest.
Since the Government’s announcement late in 2020, we’ve been building capacity and capability to deliver this work at pace. Developing the new disclosure standards will be informed through engagement with a broad range of stakeholders—in particular, entities that will be subject to the regime as well as the investors who will benefit from it.
The disclosure standards will be based on the recommendations of the Task Force on Climate-related Financial Disclosures and are expected to be accompanied by guidelines, as well as a series of transitional provisions to enable entities to begin their climate-related disclosure journey.
Undertaking this work requires an extension to the XRB's mandate which will involve an amendment to legislation in the form of an update to the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill, due to take place in late 2021.
We are delighted to be leading this important work and see the implementation of climate disclosures in New Zealand as an important step towards broader integrated reporting.
The standards will be developed and delivered through the following three iterations.
We are currently working towards our first discussion document, due to be released on 20 October 2021:
The TCFD was created in 2015 by the Financial Stability Board (FSB) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders.
The TCFD produced recommendations in 2017 that outline a framework for reporting climate-related information. To date, this has been the leading guidance on climate reporting and has received widespread support globally. Multiple countries are considering its recommendations, including Australia, Canada, the EU, and the United Kingdom.
The TCFD recommendations incorporate four key themes: governance, strategy, risk management, and metrics and targets. Under each theme, 11 disclosures are recommended.
The TCFD has also produced general and sector-specific guidance on implementing its recommendations and will continue to develop further guidance.
Climate-related disclosures will be mandatory for large listed companies (large meaning with a market capitalisation of more than $60 million); large registered banks, licensed insurers, credit unions, building societies, and managers of investment schemes (large meaning with more than $1 billion in assets); and, some Crown financial institutions (via letters of expectation).
The mandatory reporting regime takes effect for accounting periods that start on or after the XRB issues the first climate standard. Currently we are anticipating issuing a standard by December 2022. This means that entities will be required to disclose according to the standard for accounting periods that start on or after 1 January 2023. For example:
- A reporting entity with a 31 December balance date (i.e., reporting period 1 January to 31 December), would be required to prepare their first climate statement as part of their 31 December 2023 reporting.
- A reporting entity with a 30 June balance date (i.e. reporting period 1 July to 30 June), would be required to prepare their first climate statement as part of their 30 June 2024 reporting.
The Financial Markets Authority (FMA) will be responsible for monitoring, regulation and enforcement.
We are keeping a close eye on international developments in climate disclosures, such as the work coming out of the IFRS Foundation to develop an International Sustainability Standards Board, and the development of a prototype climate-related financial disclosure standard.
It is a fast-evolving space and we are keen to ensure that our work to deliver climate-related disclosure standards for New Zealand is aware of these developments.
You do not need to wait for the standards to get started on your climate reporting journey. Have a look at our page on Getting started on climate risk reporting for some tips.
Project Governance & External Advisory Panel
An External Advisory Panel acts as a consultation group on technical climate and sustainability issues, particularly those relating to the practical application and implementation of the standard. The panel includes the following members:
Annabel Chartres (PWC), Alison Howard (Wellington City Council), Adrian McDonald (University of Canterbury), Darren Beatty (Te Rūnanga o Ngāi Tahu Group), Karl Hickey (ANZ Bank Ltd), Belinda Storey (Climate Sigma), Dale Scott (Onepointfive Ltd), and Jonathan Keate (Office of the Auditor General).