Transitioning to a low emissions future: what does it mean for New Zealand businesses?
The New Zealand Government has now responded to the Productivity Commission’s recommendations (released in August 2018) on transitioning to a low-emissions economy. The Government’s response includes important measures that will affect how New Zealand businesses are managed and information available to investors, in particular, endorsement of the recommendations of the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) on establishing a framework for disclosure of climate-related risks in company financial reporting.
Who needs to read it? Why?
The changes are relevant to board members and executive management – in particular of listed issuers, registered banks and licenced insurers. The changes are relevant because they will change reporting requirements and potentially have flow-on effects on investor profiles.
What does it cover?
The Government has endorsed the following measures proposed by the Productivity Commission:
- Listed issuers, registered banks and licenced insurers will be required to make climate-related disclosures (recommendation 7.4). This will achieve a lower emissions economy by empowering investors and holding businesses to account. The Productivity Commission has suggested these changes be made through the Financial Reporting Act 2013, and the Government is working now to determine whether this is the best place for the powers to sit.
- The Government supports the findings of the Task Force on Climate-related Financial Disclosures, which provides a framework (TCFD framework) for making these disclosures. The TCFD framework covers four broad areas:
- risk management, and
- targets and metrics.
- The Government supports the recommendation of the Productivity Commission to prioritise low-emission investments (and deprioritise high emissions investments) of the NZVIF (recommendation 7.1). The Government is currently working on some of the technical issues accompanying this transition and a Cabinet Paper is expected in November 2019.
- Ministers making decisions will now be required to assess the impact of those decisions on climate change (Recommendation 8.12), and the Ministry for the Environment is currently putting together a ‘toolkit’ to assist.
The changes are an important step in formalising current thinking on how companies should be responding to climate change risk in both New Zealand and Australia. The changes, particularly reporting requirements, will clarify uncertainty under the current framework.
The Government is already working on many of the recommendations by the Productivity Commission. For other recommendations, work will commence this year. The next step is for Cabinet Papers to be produced, leading to Government policy or Bills to be introduced to Parliament.
If you need assistance in preparing your business for these changes, contact one of our experts.