New Zealand has passed new legislation that says banks and insurers must disclose the risks of climate change to their long-term business viability.
The Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill was introduced to New Zealand’s parliament earlier this week.
Key amongst the legislation’s aims is to get the finance and insurance industries reporting any risks to their operations arising from climate risks. It is based on the Task Force on Climate-Related Disclosures (TCFD) framework.
New Zealand’s Commerce and Consumer Affairs Minister, David Clark says the world’s first move for mandatory disclosure of climate risks will help the financial rector to more effectively address risks to their operations, stemming from climate change.
“It is important that every part of New Zealand’s economy is helping us cut emissions and transition to a low carbon future. This legislation ensures that financial organisations disclose and ultimately take action against climate-related risks and opportunities.”
“Becoming the first country in the world to introduce a law like this means we have an opportunity to show real leadership and pave the way for other countries to make climate-related disclosures mandatory,” Clark said.
Back in 2019, New Zealand was one of the world’s first economies to legislate net-zero carbon emissions for the country by 2050.
The goal was matched by the formation of New Zealand’s independent Climate Change Commission that would provide the government with guidelines and a roadmap to achieving net-zero emissions.
New Zealand Says Banks & Insurers Must Disclose Climate Risks
According to a report from Renew Economy, “major investors and superannuation funds have described climate change as a financial risk, arguing that a changing climate and an ongoing transformation of the wider economy pose a risk to companies that are not adequately planning for a transition.”
The Investor Group on Climate Change (IGCC) says that the legislation marks an important step in environmental risk forecasting and accountability, and should be followed by other developed economies.
Policy Director of the IGCC, Erwin Jackson says that “this is important legislation from the New Zealand government that will assist with managing systemic economic risks created by climate change and protecting the long-term savings of all New Zealanders.”
“Voluntary disclosure regimes have made good press but are not delivering the rigour and consistency needed by financial markets to fully assess and address climate risks,” Jackson said.
“The mandatory New Zealand regime goes a long way to addressing this, and we look forward to working with the national government to expand its reach to unlisted companies in the near future.”
“Ultimately, all countries, including Australia, should be moving towards implementing a robust and investable mandatory climate risk disclosure regime to manage the systemic risks created by climate change,” Jackson concluded.