Navigating New Zealand’s new Climate-related Disclosure Reporting

By Amy McWhannell

We’re living in a world experiencing hotter days, warmer seas, and extreme flooding– the reality of climate change is undeniable, and the Government is now mandating listed companies and financial institutions to report their impact of climate change.

If you are required to publish a climate-related disclosure, this new compulsory climate-disclosure report will serve as a tool for your business, your investors, and other stakeholders to assess how your business is considering climate-related risks and opportunities.

The Government has employed this new legislation using the External Reporting Board (XRB) framework, an independent Crown Entity, to issue financial reporting standards on climate-related financial disclosures, making New Zealand the first country to enforce mandatory reporting for listed companies on the NZX and organisations with portfolios over $1 billion, such as banks and fund managers.

Even if your business doesn’t fall under this criterion, we’d strongly recommend large firms voluntarily disclose through initiatives such as an annual report or sustainability report to show transparency and progress towards decarbonisation. Unlisted companies such as Toyota NZ and Silver Fern Farms are examples of voluntary reporters.

Below is a guide to the ins and outs on how to disclose your climate impact using the XRB framework, how risk informs strategy and planning, and what action is being executed to manage risk and grasp opportunities.

Climate disclosure isn’t just about emissions, it’s about understanding the financial impacts of climate change and providing investors, senior management, and other stakeholders with better information about the risks and strategies you have set in place.

When writing your report, we recommend following the XRB framework that comprises three NZ Climate Standards: NZ CS 1, NZ CS2, and NZ CS 3. The first standard provides a framework for companies to consider climate-related risks and opportunities; NZ CS 2 outlines optional adoption provisions; and NZ CS 3 contains the principles and general requirements.

Some companies are already responding to this new law by reporting their Scope 1 and 2 emissions, with active reporting showing faster carbon reductions. Back in December 2022, Forsyth Barr reviewed listed company ESG disclosures and verified that companies who had a history of reporting also reduced carbon over time compared to those who were not reporting their climate disclosures. Reporting on your climate impact will ensure transparency and showcase your adaptation to climate change, creating a more sustainable future.

Engaging with credible companies like Toitū Envirocare can help your company measure emissions, set ambitious yet achievable science-based targets, and steer you clear from greenwashing to ensure your targets are meaningful.

When writing your report, it’s important to be transparent, not be overly optimistic or leave anything out, following these four principles: Balance, completeness, understandability, and coherence. Balance is about ensuring you are presenting all financial impacts of climate change transparently. Completeness is making sure all relevant statements and requirements are in the report. Understandability is ensuring your report is written in plain English and limits jargon. Coherence is ensuring the report links to financial statements or opting for an integrated approach within your annual report.

Here are some tips we recommend helping you disclose your climate impacts:

  1. Plan ahead - Educate your team on what support you will need.
  2. Engage with leadership – Engage with senior management for support from the start, to sign off your disclosures and get buy-in.
  3. Start with available data – Work with the data and expertise that you have and simplify the disclosures where there are gaps.
  4. Keep it concise - Avoid jargon and repetition, make it clear and concise.
  5. Stick to the structure - Governance, Strategy, Risk Management, Metrics/Targets

Climate disclosure reporting in New Zealand requires planning, stakeholder engagement, and sticking to the XRB framework and will in turn help lower carbon-emissions in New Zealand ensuring everyone is playing their part.

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