Proposed exemption for climate-related disclosures timing challenge

  • Legal update

    10 July 2023

Proposed exemption for climate-related disclosures timing challenge Desktop Image Proposed exemption for climate-related disclosures timing challenge Mobile Image

Today, the Financial Markets Authority (FMA) has announced that they are considering a class exemption for certain climate reporting entities (CREs) from the requirement to include a link to their climate statements in their annual report under the climate-related disclosures (CRD) regime.

A link to the consultation document is available here.

Who should read this? Why?

NZX-listed issuers who are or will be CREs should read the consultation document because at present, they may in fact only have three months to publish their CRD, whereas the legislation was intended to give four months. 

It may also be of interest to registered bank and licensed insurer CREs if they want to advocate for the proposed exemption to be expanded to include them.

What does it cover?

The FMA is proposing that listed issuers that are CREs would be exempt from the requirement in s 461ZJ(2)(b) of the Financial Markets Conduct Act 2013 (FMCA) to include a copy or a link to a copy of their climate statements in their annual report, for a period of two years. Under the exemption, a listed issuer that is a CRE must instead include in their annual report:

  • the address of (or a link to) the Internet site where a copy of the climate statements will be accessible within four months after the entity’s balance date; and
  • an accompanying statement specifying the date that a copy of the climate statements will be accessible through that Internet site address or link.

The reason behind the proposed exemption is that a timing challenge arises where under NZX listing requirements, listed issuers that are CREs must publicly release their annual report within three months after their balance date, whereas under the FMCA, the lodgement of climate statements can be within four months after the balance date. As a result, listed issuers that are CREs must have their climate statements prepared one month in advance of when it is due for lodgement for the purposes of publishing it with their annual report.

The proposed exemption is to only last for a term of two years as the FMA intends for the exemption to be a relief against the transitional nature of the new CRD regime. After the exemption lapses, it is expected that going forward, the financial statements and climate statements will be prepared at the same time so that investors can consider them together. 

The External Reporting Board advised the FMA that the proposed exemption would not conflict with any of the reporting obligations under the Aotearoa New Zealand Climate Standards (NZ CS).

Feedback requested

The FMA is inviting feedback on a range of consultation questions, including:

  • If compliance with a three-month timeframe rather than four-month would be difficult, specify why and how and the impact if the exemption is not granted. 
  • Whether the two-year term is appropriate for the proposed exemption relief. 
  • Whether the introduction of the GHG emissions assurance requirement from October 2024 will make a difference to the necessary term of relief. 
  • Whether the conditions to the exemption are appropriate.

The proposed exemption currently does not cover registered bank CREs, and the FMA expressly invites feedback on whether this exemption should be extended to cover registered bank CREs and why.

Our view

The proposed exemption aligns with the FMA’s proposed monitoring approach to the first reporting year under the CRD regime, being broadly educative and constructive. 

The FMA acknowledges that although timing mismatches in relation to different reporting requirements is not unique, generally these can be managed. However, given the CRD regime is new and there is limited opportunity to manage these mismatches whilst grappling with the requirements of the NZ CS, the FMA considered that CREs may need the whole of the four-month timeframe as provided by the FMCA.

What next?

Submissions on the consultation document close on 7 August 2023. CREs facing timing mismatches will want to ensure the FMA has properly considered the impacts of this challenge before deciding on the details of the exemption.

If you have any questions about the proposed exemption or about the CRD regime generally, please contact one of our experts.


This article was co-authored by Hannah Cross (law clerk, financial services) and Ronnie Duan (solicitor, corporate and commercial).