Commerce and Consumer Affairs Minister Scott Simpson announced today that the Government will be making further changes to the climate reporting regime, with the goal of supporting business growth and New Zealand’s capital markets. The reforms will raise the threshold for reporting entities, meaning fewer organisations will be subject to mandatory climate-related disclosures.
The press release is available here.
Who needs to read it? Why?
These changes are relevant to all climate reporting entities. All current climate reporting entities should be aware of these proposed changes to understand whether they will still be captured under the regime as climate reporting entities and if so, the Government’s proposed changes to the director liability provisions.
What does it cover?
While there is no proposed amending legislation yet, based on the press release, we understand that the targeted adjustments to climate reporting and investment transparency rules aimed at reducing compliance burdens and encouraging capital market participation include:
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Lifting the mandatory climate reporting threshold for listed issuers from $60 million market capitalisation to $1 billion.
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Removing managed investment schemes from the climate reporting regime.
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Adjusting director and company liability settings to reduce unnecessary risk and cost while preserving robust climate disclosures.
The proposed changes respond to concerns that the current climate reporting regime is too costly and deters listings on the NZX. The Government aims to ensure the regime is fit for purpose, supports business growth, and maintains the integrity of disclosures, with Minister Simpson stating:
“Climate reporting was introduced by the previous Government, and New Zealand was first in the world to require it. While the intentions were solid, the rules proved too onerous and have become a deterrent for potential listers. It made sense to review these after the first year of reporting. We have listened to the feedback, examined how the regime operates in practice, and are now resetting the settings accordingly.
“Together, these changes will ensure the right entities are reporting, the regime is not making it harder for Kiwi firms to do business, and the information produced remains robust and useful.”
Our view
We expect that these changes will be positively received by many. The Financial Services Council has welcomed the proposed reforms as a pragmatic recalibration that supports transparency while reducing unnecessary compliance burdens, and have stated that: “These reforms are a positive step toward ensuring our capital markets remain vibrant, competitive, and accessible.”
The unknown question at this stage is when the changes will take legal effect, and in particular whether it will be before climate reporting entities with 31 December or 31 March year-ends need to lodge their next statement. We look forward to the Government providing clarity on that.
In the bigger picture, we note that the proposed changes in New Zealand have been announced at a time when the Australian regime is being rolled out. For example, many Australian superannuation schemes and their asset managers, as well as the largest ASX listed issuers are currently preparing their first mandatory statements under AASB S2 Climate-related Disclosures. The Australian government has been clear that they are committed to disclosures and the value that provides for climate adaptation. It will be interesting to see how that contrast with New Zealand plays out.
What next?
We will continue to monitor the progress of Financial Markets Conduct Amendment Bill which these changes will be passed under. If you have any questions in relation to the proposed changes and whether they will affect your business, please contact one of our experts.
This article was co-authored by Olivia Maher, Solicitor, in our Financial Services team.
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