Banks and NZX-listed companies will be granted some minor relief from new climate-reporting obligations under an exemption flagged by the Financial Markets Authority (FMA) this month.
The FMA “in principle” agreement to waive the requirement to include new climate statements in annual reports for the two sectors follows a short consultation process over July and August this year.
But the mooted exemption goes further than the original proposal by extending the relief to banks and dropping a requirement to include a link to climate statements (that would go live later) in annual reports.
The initial get-out clause was to apply only to NZ listed firms caught by the new regulations – those with a market capitalisation of $60 million or more – with the caveat for exempted annual reports to include a website address where the future climate statement would appear.
“After carefully considering submissions, the FMA has agreed in principle to grant an exemption (with conditions) for climate reporting entities who are listed issuers or registered banks from the requirement to include a copy of, or link to, their climate statements in their annual report for a period of two years,” the regulator says.
As per the current regulations, entities caught by the recently introduced law have four months post balance date to publish climate statements that must be included in their annual reports.
However, NZX-listed firms and banks are required to file annual reports three months after financial year-end, creating a “mismatch in timing”, the FMA says.
The July consultation paper says the two-year exemption period should be sufficient for those entities granted the relief to develop efficient climate-reporting processes.
“A two-year term also acknowledges that the upcoming additional requirement to have the second and subsequent sets of climate statements audited for GHG [greenhouse gas] emissions may further exacerbate the timing challenge these CREs [climate-reporting entities] face,” the FMA paper says.
“It is important that financial statements and climate statements are prepared together and can be considered together by investors, which is why the term of any exemption granted should reflect the transitional nature of the proposed relief.”
Fund managers with $1 billion plus in assets must also file their first climate reports in 2024, albeit with some first-year relief available.
Last month, the External Reporting Board (XRB) – the government entity responsible for the climate standards – also published the final guidance for the licensed managed investment scheme (MIS) sector.
According to a DLA Piper analysis, a “lot has changed” in the final MIS climate-reporting guidance compared to the draft version published last year.
“The XRB is clear that MIS Managers need to keep their business model and investors in mind when preparing their climate statements,” the DLA Piper note says. “The final guidance is more detailed and tailored than last year‘s draft, which is welcome, but MIS Managers still need to engage with the challenging work of producing data and disclosures at the fund level.”