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The Cabinet has signed off on reforms to reduce the scope of the Climate-related Disclosures (CRD) regime.
The changes will:
- remove deemed director liability for certain breaches for all reporting entities,
- raise the threshold for listed issuers, and
- remove reporting requirements for fund managers.
The Ministry of Business, Innovation and Employment (MBIE) estimates that the effect will be to reduce the number of climate reporting entities (CREs) from ~164 to ~76.
The proposals will not affect the regime’s application to banks or insurers in New Zealand.
The Government wants legislation to be in place so that affected CREs will no longer need to report for the period ended 31 March 2026 and onwards, unless they choose to do so voluntarily. That suggests a truncated select committee process.
Detail of what is proposed
Removal of deemed director liability for breaches of Part 7A FMC Act
MBIE’s consultation earlier this year recognised the challenges created for CREs by section 534 of the Financial Markets Conduct Act (FMC Act), namely the personal director liability imposed for failure by the CRE to comply with the NZ Climate Standards (deemed director liability). The Government will legislate to remove the application of this provision to CRD for directors of all CREs (including banks and insurers).
Raising of reporting thresholds for listed issuers and removal of fund managers
The threshold for equity and debt listed issuer inclusion in CRD will be raised from $60 million to $1 billion. Listed issuers will be CREs from 31 March 2026 onwards only where their market capitalisation of equity, or principal amount of debt, for the prior two reporting periods was above $1 billiion, and where they remain listed in the current reporting period.
Fund managers will be removed from the regime’s coverage entirely.
The Government plans to include the changes in the Financial Markets Conduct Amendment Bill, which is due to be reported back to Parliament by the Finance & Expenditure Select Committee by 30 January 2026.
Implications for CREs
CREs should note that the fair dealing provisions under Part 2 of the FMC Act will remain in place. These include liability for CREs under section 19, which prohibits misleading and deceptive statements in CRD, including by omission. CREs are still required to comply with the Climate Standards, even though deemed liability for directors will be removed.
For dual listed issuers, the new $1 billion threshold aligns more closely with the thresholds under the Australian regime for Group 1 entities, the first of which will be reporting for the first time for the period ending 31 December 2025.
The XRB recently consulted on potential alignment between the NZ Climate Standards and the equivalent Australian standard AASB S2. The reporting content requirements between the two regimes contain some significant differences. The XRB noted overarching calls for greater alignment with international frameworks, including IFRS S2 and AASB S2, against a need for stability and a phased approach to change.
Other CRD developments: Further extension of adoption relief on the cards
The XRB has also separately consulted on extending by two years the “adoption relief” period before disclosure of scope 3 greenhouse gas emissions and the anticipated financial impacts of climate change become compulsory. Decisions are expected imminently.
If this time extension is granted, it will also assist CREs in their third reporting period who are already preparing for their first financial impacts reports by allowing them more time to stress test the methodologies and processes required to support these disclosures.
Next steps
To discuss the above developments and their implications for your business, please reach out to one of our CRD experts.
