NZ fund managers can look forward to significant climate-reporting relief under a raft of measures put forward late in 2024 including a tiered compliance system expected to be in place by the end of this year.
In addition to a delay in mandatory carbon emissions audits (among other amendments) contained in an October consultation, the External Reporting Board (XRB) floated a new ‘differential’ model in December that would apply tiered climate-reporting obligations based on entity size and/or business category.
According to an XRB memo, the legislation allows for climate standards “to have general or specific application” with industry advice last year suggesting the urgent need for a more nuanced regulatory approach.
The government-run accounting standards-setting body embarked on a post-implementation review (PIR) of the new climate-reporting regime last year that was due to complete by the end of 2025.
However, after many entities – especially fund managers – baulked at the tight schedule for ratcheting up climate-reporting duties (such as ‘scope 3’ emissions audits), the XRB proposed some relief in the October proposals that in turn triggered the release of its mooted tiered approach.
“We have decided to bring forward the differential reporting element of the PIR because we obtained clear feedback from several submitters about the need to explore this issue sooner rather than later in response to our October 2024 consultation paper,” the XRB note says.
Under the sketched-out model, fund managers, for instance, would face separate compliance obligations “to reflect different user information needs” compared to other climate-reporting entities while business or investment scheme size also comes into play.
The XRB proposal, due to be fleshed-out in a full-blown consultation paper, would see “reduced disclosure requirements for smaller entities and/or schemes”.
Meanwhile, fund managers have backed most of the relief measures proposed in the October consultation – albeit with the majority calling for at least a three-year delay of scope 3 greenhouse gas (GHG) assurance rather than the 12-month extension flagged in the XRB paper.
For example, a Mint Asset Management submissions says “that the mandatory assurance of scope 3 GHG emissions data should be given relief of three accounting periods, instead of the one accounting period currently proposed”.
The XRB has also clarified that those fund managers captured by the climate-reporting regime (those with $1 billion or more under management) do not have to report on scope 1 and 2 emissions with, therefore, “no need for a related assurance engagement”.
But if a fund manager “chooses to make scope 1 and 2 GHG emissions disclosures, even if it says zero or nil scope 1 and 2 GHG emissions, it would need to obtain an assurance engagement over that disclosure”.
About 15 licensed fund managers lodged feedback on the XRB proposals (as well as a multi-manager representation in the Boutique Investment Group feedback) out of a total 106 submissions.
The XRB also saw a leadership change this January with incumbent chief, April Mackenzie, retiring in favour of Wendy Venter.