An Australasian investor climate change collective has urged the NZ government to closely align imminent new reporting standards with global equivalents among a raft of other recommendations.
In a recent report, the Investor Group on Climate Change (IGCC) says while NZ is the first country to legislate climate-reporting, it shouldn’t go it alone on subsequent regulatory frameworks.
Passed into law last year, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act empowers the government accounting standards agency, the External Reporting Board (XRB), with developing climate-reporting regulations.
While the XRB will follow the lead of the emerging global Taskforce on Climate-related Financial Disclosures (TCFD) reporting template, the growing government body has discretion to adapt to local circumstances.
IGCC chief, Rebecca Mikula-Wright, said in a release: “Investors with international exposure will expect New Zealand companies to provide the same market critical information on climate risks as those investors get in other jurisdictions.
“Although New Zealand has its own unique economic characteristics, in a global market, any country looking to attract private capital investment should aim to stay ahead of international developments.
The IGCC report – ‘Lessons from global trends for Aotearoa New Zealand’ – says the “XRB should support the creation of a global overarching climate accounting standard and should cooperate and communicate with global climate accounting standard setters”.
“This would reduce the cost, and increase the efficiency and comparative simplicity of complying with one global set of standards,” the paper says.
Among a list of nine recommendations, the IGCC report says the in-development XRB regulations should ‘harmonise’ across industries and existing accounting standards while also covering end-to-end climate disclosure obligations.
“In respect to specific disclosures, NZ’s climate accounting standards should cover an organisation’s entire value chain, since major impacts of the activities carried out by a reporting entity may occur in the value chain or through products and services and include Scope 3 emissions,” the IGCC says.
“Standardised metrics and targets should be set to ensure comparability, both in respect of the progress of the organisation itself, and with other organisations. These should be entity and sector specific, cross sector and sector agnostic. Common taxonomies should also be provided wherever practicable.”
The XRB has already completed consultation on the first phase (governance and risk management) of the proposed climate-reporting regulations, attracting almost 70 submissions.
In a summary of the main submission themes, the XRB notes the consultation process revealed concerns about data and access to reliable climate scenarios.
Furthermore, many submitters asked how “the climate-related disclosure standard relate to other reporting on broader environment, social and governance (ESG) matters, as well as reporting requirements in other sectors and from other agencies such as the Reserve Bank of New Zealand, or local and international stock exchange listing requirements”.
The XRB plans to launch consultation on the second phase of the climate-reporting rules – covering strategy, metrics and targets – this March.
Under the legislation all large financial institutions, NZX-listed companies and fund managers (with $1 billion plus in assets under management) must include the mandated climate information in annual reports once the XRB standards are in place.
The final XRB rules should be completed by the end of this year with formal climate-reporting expected to kick-off in the 2023/24 financial period.
IGCC boasts about 100 members of mostly Australia-based investment managers and super funds, representing about $20 trillion of assets under management. However, the NZ Superannuation Fund, Morrison & Co and Pathfinder are also IGCC members.