XRB issues timeline for developing climate-related financial disclosures
The External Reporting Board (XRB) recently issued its timeline for developing the financial reporting Standard for climate-related financial disclosures (Standard). The timeline includes consultation in February to May 2022, and publication of the standard in September 2022, with reporting entities delivering their first disclosures in 2023.
We summarise the impacts that the Standard will have on private and public sector businesses and capital markets in another news alert here.
Who needs to read it? Why?
Compliance with the new Standard will be required for the major sources of capital in New Zealand. The following persons should note the XRB’s update:
- all registered banks, credit unions, and building societies with total assets of more than $1 billion;
- all managers of registered investment schemes with total assets under management greater than $1 billion;
- all licensed insurers with total assets under management greater than $1 billion, or annual premium income greater than $250 million;
- crown financial institutions with total assets under management greater than $1 billion, such as ACC and the NZ Super Fund; and
- all equity and debt issuers listed on the NZX.
The Government estimates that around 200 organisations will be captured by the regime. However, pressure is likely to mount for Crown and local authority owned businesses (especially those that compete with listed entities) and other private enterprises to apply the standard voluntarily.
What does it cover?
The XRB sets out the below timeline and planned actions which it will continue to update as it progresses in developing the new Standards:
The Standards will be developed with engagement with a broad range of stakeholders (including entities that will be subject to the regime and investors who will benefit from it) as well as with Māori to apply a te ao Māori world view to the Standards. An amendment to legislation is also due to take place this year in order to extend the XRB’s mandate to undertake this work.
The XRB also confirms that the new Standard will build on and align with the recommendations of the Task Force on climate-related financial disclosures (TCFD) while taking account of international developments, noting that while New Zealand initially lead on mandatory disclosures, other governments such as the United Kingdom have caught up and are working on a similar schedule to New Zealand.
We welcome the XRB’s update on the development of the Standards. With climate-related disclosures potentially required for the financial year ending 2023 at the earliest, reporting entities should be prepared for this at the start of 2022.
Future-focused entities and its respective boards and leadership teams should already be undertaking a systematic review of climate change implications on their businesses and embedding climate issues into structures and decision-making and improving navigation of the risks and opportunities.
To assist with this, we recommend that reporting entities take a look at the various TCFD guidance and international developments that the XRB has linked on its website here.
If you have any questions in relation to the proposed climate-related financial disclosure regime or are considering how these changes will affect your business, please contact one of our experts.