Climate-reporters and small DIMS-issuers have been formally granted some compliance relief in notices stamped by the Financial Markets Authority (FMA) last week.
Under a well-signalled move, the 200 or so entities captured by the climate-reporting legislation won’t have to provide assurance on downstream ‘scope 3’ carbon emissions until the 2026 financial year.
The one-year relief evens the playing field for those entities already reporting scope 3 data and others who have adopted the previous External Reporting Board (XRB) 12-month opt-out provision for disclosing any downstream greenhouse gas statistics.
According to the FMA notice, the exemption – which came into force on April 28 and will expire on April 30 next year – “promotes fairness in year 2 of climate reporting” for those groups that “disclose all or part of their scope 3 greenhouse gas emissions, by not requiring those disclosures to be assured”.
“… the relief only applies for 1 reporting period to provide flexibility for those climate reporting entities and their assurance providers who have been facing challenges or complexities in obtaining sufficiently reliable information to support assurance of scope 3 greenhouse gas emissions disclosures,” the notice says.
While the 12-month scope 3 assurance and reporting delays would be welcome, the notice falls well short of the three-year exemption period that climate-reporting fund managers have lobbied for.
The Boutique Investment Group (BIG), which represents about 20 non-bank fund managers, argued in a submission to the XRB last year: “If we publish such inconsistent and variable data, assurance is likely to be counterproductive. While an auditor can verify our methods, it won’t make the data any more accurate.
“Assurance may falsely reassure the ‘end user’ about the reliability of speculative information.”
But the BIG hopes may still be realised as the XRB embarks on the first of two consultations looking to provide further climate-reporting relief as part of a formal review of the system.
Submitters have until June 13 to provide feedback on potential alignment of the world-first NZ climate-reporting laws with other jurisdictions.
In a further consultation slated for later in the year, the XRB will table proposals to introduce “reduced disclosures for smaller” climate-reporting entities and “differential reporting for specific classes” of firms covered by the legislation.
Meanwhile, the FMA has also approved some size-based compliance relief for discretionary investment management schemes (DIMS).
The regulator has increased the size threshold for exemptions from preparing institutional standard audited accounts for DIMS to $130 million from $100 million in the previous notice.
“Medium-sized DIMS licensees (licensees with between $130m and $327m retail FUM) are exempt from the requirement to have their financial statements audited by a licensed auditor but must prepare financial statements that comply with GAAP [generally accepted accounting principles] and lodge them with the Registrar,” the FMA note says.
Previously, the medium-sized reporting relief applied to DIMS holding assets between $100 million and $250 million.