Climate-related Disclosures

The External Reporting Board (XRB) is proud to play its part in addressing climate change through the establishment of a climate-related disclosure framework for Aotearoa
New Zealand.

We are excited to announce that our third and final consultation on climate-related disclosures is now open. This consultation will be open for feedback until 27 September 2022 at 12pm.

Find our consultation document, exposure drafts and supporting documents here.

Consultation

Throughout the development of the disclosure standards, we have been committed to taking a collaborative, open and transparent approach. To date, we have received 133 formal submissions plus a substantial amount of other informal feedback through direct engagement. This input has provided us with valuable insights into the needs and concerns of climate related reporting entities (CREs). Following the release of the Strategy and Metrics and Targets consultation, we also ran a number of deep dive sessions which usefully informed not only the standards, but also the development of FAQs and
staff guidance. 

Click here for past presentations and documents related to our previous rounds
of consultation.

The Journey so Far

 

Background

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.

In October 2021, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill was passed and received Royal Assent. As a result, the XRB now has a mandate to issue climate standards as part of a climate-related disclosures framework, and guidance on non-financial matters.

Once the XRB issues its first climate standard, climate-related disclosures are 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). The XRB aims to issue its first climate standard in December 2022, meaning these entities would be required to make disclosures alongside wider year end reporting in 2023 at the earliest.

Developing Climate-related Disclosure Standards

The climate-related disclosures legislation gives the XRB a mandate to develop a climate-related disclosures framework. The XRB intends to issue the following:

NZ CS 1 is the main disclosure standard and will be based on the recommendations of the Task Force on Climate-related Financial Disclosures. NZ CS 2 will be an adoption standard to enable entities to begin their climate-related disclosure journey. NZ CS 3 will be an authoritative notice containing key concepts, like materiality. Accompanying guidance will be a living document provided alongside the standard. Our intention is that guidance will evolve over time.

The climate-related disclosure framework is being 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.

We are delighted to be leading this important work and see the implementation of climate-related disclosures in New Zealand as an important step towards broader
integrated reporting.

Task Force on Climate-related Disclosures (TCFD)

The TCFD was created in 2015 by the Financial Stability Board 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.

TCFD graphic

[View larger diagram]

The TCFD has also produced general and sector-specific guidance on implementing its recommendations and will continue to develop further guidance. 

FAQs 

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 internal Project Steering Group provides governance and oversight, chaired by XRB Board member Jacqueline Cheyne. 

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). 

Standards