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New Zealand becomes world’s first country to introduce mandatory TCFD disclosure

Impending reporting rules are to be applied on a ‘comply and explain’ basis

Around 90% of New Zealand’s assets under management could be forced to report against the recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD) by 2023, as the country’s Government becomes the first in the world to make the framework mandatory.

In an announcement made today, New Zealand’s Climate Change Minister, James Shaw, said: “Australia, Canada, the UK, France, Japan, and the European Union are all working towards some form of climate risk reporting for companies. But New Zealand is moving ahead of them by making disclosures about climate risk mandatory across the financial system.”   

Under the proposals, all listed issuers, in addition to banks, asset managers and insurers with assets over NZ$1bn (€0.57bn) will be required to disclose their exposure to climate-related risks and their policies to address such risks.

The government estimates that around 200 organisations, or 90% of assets under management in New Zealand, will be included within the scope of the new regime, which will be applied on a ‘comply or explain’ basis – meaning that companies can dodge the requirements if they provide a suitable reason.

New Zealand’s audit watchdog, the External Reporting Board, will develop a climate reporting standard, while the Financial Markets Authority will oversee enforcement.

The draft legislation has now been submitted to Parliament and could come into force as early as 2023.     

Michael Zimonyi, External Affairs Director at the Climate Disclosure Standards Board (CDSB), described the move as “the truest implementation of the TCFD recommendations” so far. He said New Zealand was now in a position to establish “international best practice” by ensuring that climate-related disclosures as “consistent and comparable”. 

CDSB organised a number of introductory TCFD workshops in New Zealand over the past year, in addition to facilitating a session with UN climate change lead Mark Carney, who oversaw the creation of the TCFD in his former role as Governor of the Bank of England and Chair of the Financial Stability Board.