New Zealand is to be the first country in the world to require the financial sector to report on climate risks.
The new regime will be on a comply-or-explain basis, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, which is widely acknowledged as international best practice.
Businesses covered by the requirements will have to make annual disclosures, covering governance arrangements, risk management and strategies for mitigating any climate change impacts. If businesses are unable to disclose, they must explain why.
In total, around 200 organisations will be required to disclose their exposure to climate risk.
All registered banks, credit unions, and building societies with total assets of more than $1 billion will be covered by the programme, ensuring that about 90% of assets under management in New Zealand are included within the disclosure system.
New Xealand's Minister for Climate Change James Shaw says: “The changes I am announcing today will bring climate risks and resilience into the heart of financial and business decision making. It will ensure the disclosure of climate risk is clear, comprehensive and mainstream.
“Australia, Canada, 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.” James Shaw said.
If approved by Parliament, financial entities could be required to make disclosures in 2023 at the earliest.