New Zealand has become the first country in the world to force mandatory climate-related reporting for its financial sector, a move experts say will ensure the detrimental effects of climate change are regularly observed in business and ultimately help accelerate emissions reductions.
The new law will apply to close to 200 of New Zealand’s largest insurers, banks, publicly listed companies and investment managers.
Large foreign banks, including the four central banks in neighbouring Australia, will likewise be impacted.
Commerce and Consumer Affairs Minister David Clark said the law was a step forward to securing a green future for New Zealand.
"It is important that every part of New Zealand’s economy is helping us cut emissions,” Clark said back in April when the legislation was first introduced, before being passed on Oct. 21. “Financial services and markets play an important role in New Zealand’s transition to a clean, green and carbon-neutral future.”
New Zealand’s Parliament passed mandatory climate-related risk disclosures for large listed companies and financial institutions into law yesterday.— James Shaw (@jamespeshaw) October 22, 2021
Looks like the US Treasury is about to follow suit. https://t.co/BsrjBL9BDA
Typically, most financial institutions don’t outwardly disclose the impact of their investments on the environment.
By making it mandatory to disclose information on the “risks, and opportunities, climate change presents to their business,” Minister for Climate Change James Shaw said entities will be pushed to be more sustainable by “factoring the short, medium and long-term effects of climate change” into their business decisions.
The first disclosures are expected to be made in 2023.
The world-first climate reporting legislation forms part of New Zealand’s overall climate policy, sitting alongside requirements for the public sector to be carbon neutral by 2025 and the entire nation to stay below 1.5 degrees of global warming above pre-industrial levels.
New Zealand also has its net zero emissions by 2050 goal enriched in law.
While the new legislation has been welcomed, activists say the nation still isn't doing enough. Methane from agriculture and waste, which account for over 40% of New Zealand’s emissions, are excluded from the zero-emissions goal, leading research group Climate Action Tracker to rate the nation’s climate policy “highly insufficient.”
Similar climate-related disclosures for financial institutions can be found in Switzerland, France and the United Kingdom.