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The Financial Markets Authority (FMA) and the External Reporting Board (XRB) have announced changes to the climate-related disclosures regime to reflect the Cabinet decision to narrow the regime’s scope and the FMA’s ‘no action’ relief for climate reporting entities (CREs) due to be relieved of the obligation to report.
Chapman Tripp’s commentary on the Cabinet-approved changes is available here. The legislation is expected imminently in the form of an Amendment Paper to the Financial Markets Conduct Amendment Bill, to be followed by a shortened select committee submission process, with passage in Q1 2026.
XRB/FMA changes
XRB to extend adoption relief for two years
“Adoption relief” applicable to the disclosure and assurance of scope 3 greenhouse gas emissions and disclosure of anticipated financial impacts of climate change will be extended for two years – taking it out to FY28.
This was very strongly supported by submitters to the XRB’s consultation. Key reasons were the lack of data availability (and insufficient quality of data) across value chains, heavy reliance on third-party estimates, low readiness for third-party assurance, the cost of compliance, and the need to align timing and requirements with Australia’s AASB S2 and ISSB standards to reduce duplication, improve comparability, and address uncertainty.
In relation to financial impact disclosure reporting, CREs emphasised that meaningful reporting would require detailed “how to” guidance, worked examples, and standardised methodologies to ensure comparability and avoid misleading disclosures given high measurement uncertainty and limited data.
The XRB’s Auditing and Assurance Standards Board has also agreed to replicate the impact of the extension for scope 3 emissions assurance with a minor update to the relevant NZ GHG emissions assurance standard, NZ SAE 1.
Broader exemption relief
The exemption for CRE issuers and banks from the need to include in their annual report a copy of, or link to that entity’s climate statements will be extended for two years. A replacement Exemption Notice is being drafted to commence on expiry of the current exemption on 7 December 2025 and to run until 31 December 2027.
Treatment of CREs also subject to the Australian and foreign regimes
In October, the FMA issued an exemption notice releasing an Australian domiciled and NZX listed issuer from the requirement to lodge CRD in New Zealand provided that it meets certain conditions – including the lodgement of its Australian sustainability reports on the New Zealand CRD register.
Given other NZX listed foreign exempt issuers and banks face the same duplication issue, the FMA has consulted on providing a class exemption for certain overseas incorporated CREs where they are required to produce CRD in their home jurisdiction.
This would apply to foreign entities listed on the NZX, bank branches and insurer branches incorporated in certain jurisdictions.
This will be a welcome development for many CREs; the XRB’s report back on its earlier consultation on international alignment noted strong support for some of mutual recognition of climate standards, climate reports or both, particularly between New Zealand and Australia, or unilateral recognition by New Zealand as an alternative.
Next steps for affected CREs
CREs with September and December balance dates may still elect to publish FY25 CRD, despite the FMA’s no action advice, but if they do so, should fully comply with the current law.
For all CREs, although deemed director liability and certain substantiation requirements will be removed under the new legislation, the obligation not to make misleading or deceptive statements in CRD in Part 2 of the FMCA will remain.
Recommendation 4.4 of the NZX Corporate Governance Code also remains in place, recommending issuers to make non-financial disclosures at least annually, including as to environmental factors and practices, and explanation of how operational or non-financial targets are measured. NZX listed issuers can elect not to comply with this recommendation.
All CREs that will remain in scope after the amending legislation is in place will still be required to comply with the Climate Standards, subject to the two new adoption provisions to be issued and any applicable exemptions granted by the FMA.
To discuss the above developments and their implications for your business, please contact one of our CRD experts.
