Sustainability disclosures in a post-CRD age: the implications for New Zealand issuers

The Financial Markets Authority (FMA) has released its final Sustainability-related disclosure guidance (Guidance) which replaces its 2020 Disclosure Framework for Integrated Financial Products.

The Guidance applies to all sustainability-related claims by entities regulated under the Financial Markets Conduct Act 2013 (FMC Act). We expect it will be of particular interest to managed investment scheme (MIS) managers, who may already be reviewing their disclosure practices in light of the removal from of MIS managers from the climate-related disclosure (CRD) regime. We summarise the key themes below.

Summary of the Guidance

The Guidance sets out the FMA’s expectations about what good sustainability-related disclosure practice looks like, and how it will apply the provisions of the FMC Act (including its enforcement toolkit) to sustainability-related claims.

The Guidance sets out four key principles for issuers to follow, which are largely unchanged from the 2025 consultation draft. Those principles, and some (selective) key points for noting in relation to each of them, are:

Claims need to be clear

Claims need to be clear and easily understood (using precise but plain language) so that investors have the information they need to make an informed decision.
Issuers should clearly describe the materiality, benefits and risks of the sustainability-related aspects of the product, relative to the more ‘vanilla’ aspects.
Measurement metrics and reporting frameworks should be disclosed where issuers are claiming a financial product will achieve a particular target or outcome.
Issuers should set out any consequences for breach of a sustainability-related strategy, including any product labelling consequences, and how investors will be informed.
Issuers should think about how they communicate changes to a sustainability-related strategy, so investors can consider whether it remains aligned with their investment objectives.

Substantiate your claims

Product labelling should be clear and accurate and explain why the label is applied, and the issuer must ensure that not only the product’s features but also its actual practices align with the label (especially when the product does is not aligned with a recognised third-party standard).
Sustainability-related claims should be substantiated, either through external review and assurance services (accurately explained), or by timely and accessible measurement and reporting.

Messages need to be consistent

Issuers should ensure that sustainability-related claims are consistent and accurate across all platforms (for example, the PDS and the issuer’s website), including as to terminology and tone.
Product advertising should be presented in a balanced way that does not exaggerate the sustainability-related characteristics of a product.

Third-party involvement is effectively managed

Issuers retain responsibility for all sustainability-related claims regardless of the use of third-party data providers and should implement policies and processes to review the accuracy of third parties’ data.
Issuers should disclose the nature and scope of any third-party assurance or certification over sustainability-related claims.

Our comments

In our view, the Guidance is a pragmatic, practically focussed and very helpful resource for issuers who make sustainability-related claims. It represents a significant improvement on the 2020 Disclosure Framework for Integrated Financial Products, which was criticised for lack of clear scope and application, and for introducing new terminology which was neither widely used in the market nor defined in the FMC Act.

We are also pleased that some of the more problematic elements of the consultation draft have been omitted from the final document – in particular, the potentially confusing term ‘transition-focused financial product’ is no longer used. The sections on financial advice and CRD have also been removed, and we agree that those are better suited to separate guidance.

Forward-looking considerations for MIS managers

Approaching disclosure of climate information in a post-CRD era

The narrowing of the CRD regime (which we wrote about separately here) will cause MIS managers previously within the scope of that regime to revisit their approach to the disclosure of climate-related information. We expect many larger managers to continue some form of voluntary climate reporting, even if not in full alignment with the Aotearoa New Zealand Climate Standards. However, it is possible some managers will reduce or withdraw from climate reporting.

Regardless of how managers approach this challenging exercise, the key principles of the Guidance should be front of mind. These include carefully explaining any impacts from changes to transition plans or reductions in disclosed climate-related metrics (including changes to the level of assurance or verification) and considering if investors should be proactively contacted.

Managers will also need to carefully consider reputational implications in addition to investor expectations.

The recent High Court decision in Nazzal and others v Guardians of New Zealand Superannuation is potentially relevant in this context. The plaintiffs’ application for judicial review had been prompted by the Guardians’ decision not to exclude various investments in companies said to be complicit in human rights abuses in the Israeli-occupied Palestinian territories. The plaintiffs obtained a declaration that elements of the Guardians’ investment policy and sustainable investment framework did not comply with the Guardians’ governing legislation and were unreasonable and unlawful. Whilst the decision is specific to the Guardians’ unique statutory framework, it is a reminder that wider stakeholders will increasingly seek to hold fund managers to account for investment decisions which are inconsistent with perceived ethical norms.

Considering fund structure and investment approach

On a practical level, managers should carefully consider the specific characteristics of each MIS when determining their sustainability-related disclosure obligations. For example:

does the manager delegate investment management to a third party? If so, can the third party effectively implement the manager’s sustainability policies? Does the manager have robust policies and procedures in place to monitor this?
does the MIS have synthetic exposure to an asset class (i.e., through the use of derivatives) which means the manager cannot implement their usual exclusions, stewardship and/or proxy voting practices over a material portion of funds under management?
does the MIS invest into underlying third-party funds over which the manager cannot exercise the same level of oversight or control regarding sustainability-related matters? If so, are these limitations clearly disclosed to investors?
does the MIS invest into unlisted or alternative assets? If so, does this cause practical difficulties in applying the manager’s sustainability policies, including from a lack of good quality or timely data sources?

General FMC Act requirements

The Guidance is a timely reminder of general FMC Act obligations that may apply to sustainability-related disclosure. In particular, issuers should be mindful of:

general ‘greenwashing’ risk arising from the fair dealing obligations in Part 2 of the FMC Act, which apply to all communication channels including advertising and website content (in this regard the FMA’s Advertising offers of financial products under the FMC Act guidance note is also relevant)
the requirement in section 57 for the PDS and other register entries (collectively) to include all material information relating to the offer (this also requires managers to consider whether climate change should be disclosed as a general or specific risk), and
the requirement in section 164 for the statement of investment policy and objectives (SIPO) to adequately describe the investment policy and objectives for a MIS.

Next steps

MIS managers should be taking the opportunity to review their sustainability-related claims and to undertake a careful gap analysis against the Guidance. The FMA’s inaugural Financial Conduct Report from July 2025 makes clear that its approach in this area will move from educational to enforcement-based now the Guidance is published.

Managers should also continue to monitor local and international developments in this area, including the progress of the voluntary New Zealand Taxonomy being developed by the Centre for Sustainable Finance.

If you would like more information on how the Guidance may apply to your product offerings, please get in touch with one of our experts.