Legislation introduced requiring climate-related risk disclosures

15 April 2021

The legislation to require climate-related risk disclosures by listed issuers, banks, credit unions, building societies, insurers and investment managers above a certain threshold has now been introduced to the House.

The Government is aiming for implementation for the 2022–2023 financial year, assuming that the External Reporting Board (XRB) will have developed the necessary climate standards by that time.

Penalties for non-compliance with the new requirements will attract fines of up to $5m and possible imprisonment.


The Bill will apply to ‘climate reporting entities’, defined to include:

  • all listed issuers of quoted equity securities or quoted debt securities
  • registered banks, credit unions and building societies, where the entity’s total assets for each of the two preceding accounting periods exceed $1b
  • licensed insurers where the insurer had either $1b total assets or gross premium revenue of at least $250m over each of the two preceding accounting periods, and
  • managers of registered (investment) schemes where total assets under management exceed $1b (with certain caveats).

Banks, credit unions, investment managers and insurers which are incorporated overseas will qualify only if their New Zealand business is deemed large. Because size is defined by reference to accounting periods, an entity may qualify in some years but not in others.

Disclosure obligations

Climate reporting entities will be required to prepare climate statements and to state in their annual reports where these statements can be accessed. Climate statements must be signed by two directors of the entity.

Climate statements must be prepared in accordance with climate standards currently being developed by the XRB, which will align with the framework provided by the Task Force on Climate-related Financial Disclosures (TCFD).   

The standards will:

  • encourage entities routinely to consider the short, medium and long-term risks and opportunities from climate change
  • enable them to show how they are considering those risks and opportunities, and
  • enable investors and other stakeholders to assess the merits of how entities are considering those risks and opportunities.

They must be prepared within four months of the entity’s balance date. Group climate statements covering any subsidiaries an entity may have must be completed in the same timeframe. Managers of registered investment schemes must complete separate statements for each fund of the scheme.

A climate reporting entity may claim an exemption if it reasonably determines, with supporting evidence, that its activities will not be materially affected by climate change. The entity must obtain independent assurance of such a determination from a qualified CRD assurance practitioner.    

Significantly, the Bill requires that entities assure their climate statements in respect of any disclosure of their greenhouse gas emissions. Again, assurance must be provided by a qualified CRD assurance practitioner.


The obligations in the Bill are dependent on the XRB issuing climate standards that apply to the climate reporting entity. On its current timeline, the XRB intends to publish initial climate standards in late 2022, requiring first disclosures to take place in late 2023 in respect of the 2022 – 2023 financial year. 


The enforcement provisions as currently introduced are significant.

  • Failure to lodge a climate statement within four months of balance date or failure to link to the climate statement in the annual report risk fines of up to $50,000.
  • Knowing failure to comply with a climate standard risks fines of up to $2.5m. Directors of such entities also risk fines of up to $50,000 and up to five years’ imprisonment.
  • Failing to keep relevant records, to prepare or lodge climate statements at all, or to satisfy the assurance requirements, risks civil pecuniary penalties of up to $5m (or $1m for individuals).

Our comment

The purposes of the Financial Sector (Climate-Related Disclosures and Other Matters) Amendment Bill are:

  • to ensure that the effects of climate change are routinely considered in business, investment, lending, and insurance underwriting decisions
  • to help reporting entities better demonstrate responsibility and foresight in their consideration of climate issues, and
  • to lead to smarter, more efficient allocation of capital, and help smooth the transition to a more sustainable, low-emissions economy.

As anticipated, the Bill focuses on incentivising entities to respond to the risks that climate change poses to their business and to share this information with investors. The information required by the disclosure will allow businesses to assess the potential risks and opportunities presented by climate change and whether their strategy and business model will maintain profitability in a low-carbon economy.

Change is moving fast. It is imperative that affected organisations begin to develop the necessary data and expertise that will be required to comply, if they have not done so already. 

In the absence of published standards, the recommendations of the TCFD are a good place to start. Our Director’s toolkit will also provide valuable guidance.


Our thanks to Emma Ricketts for drafting this Brief Counsel. 

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