NZ banks and building societies typically outperformed insurers across a range of metrics in round one of the climate-related disclosure (CRD) regime, according to a new study by Mosaic Financial Services Infrastructure.
The Mosaic report, a sequel to a similar review of KiwiSaver providers published earlier this year, found banks and building societies (BBSs) “generally produced more compliant and insight-rich CRDs compared to insurers”.
Among other reasons, the study attributes the reporting discrepancy between the two sectors to “the relatively lagged development of insurance-specific climate-reporting guidance and lower data access rights due to the structural nature of insurance services”.
While slightly more insurers (87 per cent) than BBS firms (81 per cent) disclosed so-called ‘Scope 3’ carbon emissions in their inaugural mandatory CRDs, bank-related businesses came out ahead in all other metrics including disclosing exposure to “both transitional and physical climate risks”.
“We found that BBSs were statistically significantly more likely than insurers to disclose any information (either qualitative or quantitative) for vulnerability to both of these risk types, as well as to provide solely a quantitative value for this,” the paper says. “BBSs were also statistically significantly more likely than insurers to disclose any information (either qualitative or quantitative) on their alignment with climate opportunities.”
Nonetheless, almost 60 per cent of the total 32 entities – split equally between insurers and BBS companies – disclosed between 80 per cent and 100 per cent of required metrics and targets in their first reports while almost 30 per cent covered between half and 80 per cent of the data points.
Just 16 per cent met less than half of the CRD requirements, falling into the ‘follower’ bucket as defined by Mosaic.
“The main compliance gaps across our sample disclosures stemmed from low data availability — be this due to a CRE’s [climate-reporting entity] early climate maturity, limited financial resources, or policy-restricted data access,” the report says.
“Where CREs had low access to supply chain emissions data or data to quantify exposure to climate risks and opportunities, they were prevented both from meeting compliance obligations and from deciphering a clear strategic path forward. On the other hand, the strongest CRDs were differentiated by leveraging a diversity of data to crystalise decision-useful insights.”
NZ was first in the world to introduce mandatory climate reporting for certain sectors in a regime launched in the previous financial year. About 200 entities including most NZX-listed firms, banks, insurers and fund managers with $1 billion plus under management are now required to file annual CRDs.
However, following the first-year filing both the External Reporting Board (XRB), which sets climate disclosure standards, and the government have moved to ease some compliance obligations and extend exemptions.
The Ministry of Business Innovation and Employment (MBIE) “has consulted on the potential for adjustments to the CRD regime to raising the thresholds for listed issuers and investment fund managers to be CREs and the director liability settings”, the Mosaic study says.
“We understand that MBIE’s recommendations are currently awaiting Cabinet approval before being announced. They will then require amending legislation to be passed in order to take effect and the timing of that is unknown.”
The XRB, meanwhile, has pushed out the deadline for emissions assurance reporting by one year with a raft of other reforms, such as a tiered compliance system, under consideration.
Tracey Berry, Mosaic partner, says the report – supported by legal firm, MinterEllisonRuddWatts – highlights climate disclosure “industry challenges and best practices”.
“By acting on CRD insights, financial institutions can grow their role in driving sustainable investment, shaping capital flows to enhance climate resilience,” Berry says. “Furthermore, the CRD process can help in navigating the complexities of climate adaptation and transition – both of which are vital for long-term resilience in an evolving economic, regulatory, and environmental landscape.”