MR No. 2021 – 53
The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko acknowledges the passage of the third reading of the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill.
The new legislation will require certain entities, to be known as Climate Reporting Entities (CREs), to produce annual climate statements that identify and report on the impact of climate change on their organisations and disclose greenhouse gas emissions.
The intent of the climate-related disclosure (CRD) regime is to ensure that the effects of climate change are routinely considered in CRE’s business, investment, lending and insurance underwriting decisions.
The FMA will be responsible for monitoring and enforcing the new regime.
Next steps in the implementation of the regime
The CRD legislation also tasks the External Reporting Board (XRB) with responsibility for developing climate reporting standards for the new regime. The standards will be based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The XRB is now consulting on Climate-related Disclosures - Governance and Risk Management.
Climate statements will be required to be produced by a CRE for annual reporting periods that commence on, or after, the date the XRB issues the first relevant climate standard. The XRB is currently expecting to issue the first climate standard by December 2022, which means climate statements will be required to be produced by CREs from early 2024 (at the earliest), for annual reporting periods starting on or after 1 January 2023.
Next steps for the FMA
The FMA plans to issue high level guidance for CREs on compliance expectations by December 2022 and provide more detailed guidance throughout calendar year 2023.
Sarah Vrede, FMA Director of Capital Markets, said: “We welcome the new legislation which establishes a mandatory disclosure regime that requires significant financial sector entities to identify and report on the impact of climate change on their organisations.”
“Our initial regulatory approach will be focused on supporting climate reporting entities and other relevant stakeholders as they prepare for the new regime. For the next few years, we will have a strong focus on supporting and encouraging development of good practice. In the early stages of the new regime, enforcement action is likely to be focused only on serious misconduct, such as failure to produce climate statements or where climate statements are false or misleading.”
The CRD regime will capture around 200 entities, comprising:
The Ministry of Business, Innovation and Employment (MBIE) and the FMA are currently consulting with levy payers on two potential funding options for the FMA’s new CRD regime responsibilities. Consultation closes on 7 November 2021.
The CRD legislation amends the Financial Markets Conduct Act 2013 (the FMC Act), the Financial Reporting Act 2013 and the Public Audit Act 2001. The CRD legislation inserts a new Part 7A to the FMC Act which provides a framework to require certain CREs to produce annual climate statements.
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