The Financial Markets Authority (FMA) has published its third climate-related disclosures insights report, following its reviews of climate statements for the second reporting period. This report reflects a period of transition from initial implementation towards developing maturity in climate reporting practices. The full report is available here.
It builds on and should be read together with the FMA's first report (published December 2024, available here and discussed in our earlier article) and second report (published 2025, available here and discussed in our earlier article).
Who needs to read it? Why?
The report gives a clear steer on the FMA’s view of the growing maturity across climate reporting entities (CREs), as well as identifying areas for improvement to support more informed decision-making.
It is primarily intended for CREs and their directors, as well as assurance practitioners and advisers. CREs should read it carefully and use the FMA's findings, alongside any individual feedback already received, to strengthen their disclosures ahead for their next climate statement.
What does it cover?
The report is based on a review of 62 climate statements from the second year of disclosures under New Zealand’s climate-related disclosure regime. It reflects a period of transition from initial implementation towards developing maturity in climate reporting practices, with many CREs demonstrating clearer report structures, an uplift in greenhouse gas emission disclosures, improved articulation of governance and risk management processes and an increasing recognition of material business risks driven by climate change.
The report addresses four focus areas from the FMA's second year of reviews. In brief:
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Improvements from prior reports: The FMA observed progress in areas including clearer report structures, improved GHG disclosure quality and better articulation of governance and risk management processes. Recurring issues remain, including incomplete CRD register filings, referring to prior-year climate statements to meet current-year requirements, material inconsistencies between reporting periods and insufficient disclosure of the extent to which targets rely on offsets.
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Physical risk disclosures: The FMA considered that physical risk disclosures often lacked sufficient detail about how underlying physical climate drivers and events translate into risk, limiting the usefulness of information for primary users. With input from a climate scientist, the FMA found that the data outputs used for analysis were often not the most appropriate choice for the specific hazards being assessed – potentially causing risks to be understated or resources to be misallocated. CREs are expected to engage with the hazard-exposure-vulnerability framework and draw on publicly available New Zealand climate hazard data.
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Current financial impacts and transition planning: NZ CS 2 adoption provisions for current financial impacts and transition planning were only available in a CRE's first year of reporting. Most CREs made reasonable efforts to disclose all required information about transition plan aspects of strategy. The primary area for improvement was the absence of clear linkages between disclosed material risks and any corresponding (or absent) targets and actions.
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GHG assurance: Most CREs obtained assurance as required, but the FMA identified omissions and errors in some independent assurance reports, as well as independence issues and unclear cross-referencing to GHG inventory reports.
What is the FMA doing next?
Key initiatives proposed by the FMA include:
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compiling a live register of publicly available New Zealand climate hazard data and analysis, including outputs where climate modelling has already been undertaken;
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running educational workshops on physical risks, supported by the climate scientist who assisted in the FMA's disclosure reviews; and
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publishing educational material and incorporating physical risk discussions into individual feedback meetings.
The FMA is also monitoring legislative and standard-setting developments under the CRD regime, which may influence its approach for the fourth year of monitoring, and will communicate any updates to the market as those developments progress.
Looking forward, to the third year – covering reporting periods ending between 31 December 2025 and 30 November 2026 – the FMA says it will continue its broadly educative and constructive approach in monitoring.
Our view
We welcome the third report and the FMA's continued commitment to an educative and constructive monitoring approach.
The report's strong focus on physical risks is timely. The FMA's expectation that CREs engage more rigorously with the hazard-exposure-vulnerability framework is appropriate and reflects that reality.
Climate change is already affecting New Zealand through more frequent and severe weather events, and businesses will need to adapt. This may be linked with the recent the National Climate Change Risk Assessment which found that New Zealand was insufficiently prepared to withstand and respond to the escalating impacts of climate change. See our newsletter here.
The engagement by the FMA of a climate scientist to assist in reviewing physical risk disclosures is a significant development. It signals that the FMA is lifting the technical rigour of its assessments. CREs and their advisers should expect a more demanding review environment – even if the formal approach remains educative for now.
The FMA's findings make clear that these issues relating to physical risk analysis arose even where CREs engaged third-party providers to undertake aspects of data collection and analysis. Responsibility for disclosure quality remains squarely with the CRE, in any case. Accordingly, boards should satisfy themselves that the data and methodologies underpinning their physical risk assessments are fit for purpose – not simply that a reputable provider was engaged.
What next?
If you have any questions in relation to the FMA's third insights report or are considering how these findings affect your climate-related disclosure obligations, please contact one of our experts.
This article was co-authored by Darlene Hu (Solicitor), in our Financial Services team.
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