How to prepare for new disclosures

In 2021, the New Zealand government passed legislation to make climate-related disclosures mandatory for more than 200 financial institutions, including publicly listed companies, insurers, banks, nonbank deposit takers and investment managers.

Affected organisations are expected to publish disclosures from financial years starting in 2023, subject to the publication of climate standards from the External Reporting Board (XRB).

The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 amends the Financial Markets Conduct Act 2013 (FMC Act), the Financial Reporting Act 2013 and the Public Audit Act 2001.

The XRB is set to issue reporting standards in December 2022 based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which are considered international best practice for climate-related financial reporting and are already in use on a voluntary basis in New Zealand.

According to the XRB, “the climate-related disclosure framework is being informed through engagement with a broad range of stakeholders – in particular, entities that will be subject to the regime, as well as the investors who will benefit from it”.

If the XRB’s standards are released as scheduled by the end of 2022, subject entities would be required to make disclosures alongside their wider year-end reporting in 2023.

Among the 200-plus entities required to produce climate-related disclosures are:

• All registered banks, credit unions and building societies with assets totalling more than $1 billion.
• All managers of registered investment schemes with more than $1 billion in total assets under management.
• All licensed insurers with more than $1 billion in total assets, or annual premium income exceeding $250 million.
• Crown Financial Institutions with more than $1 billion in total assets.
• Listed issuers of quoted equity securities with a combined market price exceeding $60 million (excluding those listed on growth markets).
• Listed issuers of quoted debt securities with a combined face value of quoted debt exceeding $60 million.
• Overseas incorporated organisations whose New Zealand businesses exceed the thresholds outlined above.

In their Low Emissions Economy report, the Productivity Commission identified an “ongoing and systemic overvaluation of emissions-intensive activities due to a lack of information about risks or alternatives”.

This is largely due to few financial organisations in New Zealand reporting climate-related information, and existing reports are often inconsistent.

Thus, the goal of this new legislation is to promote transparency and help climate-reporting entities better demonstrate responsibility and foresight in their consideration of climate issues. This will also support New Zealand in its efforts to reach net-zero carbon by 2050.

As they wait for the XRB to release specific reporting standards, subject entities should prepare by implementing systems for tracking, measuring and reporting their climate-related data.

By preparing as early as possible, organisations will have ample time to implement processes and test out systems before the first reports are due.

An auditable ESG platform, such as Diligent ESG, can also help to ensure compliance with the new disclosure requirements while yielding significant time and cost savings.

It empowers organisations to address the key components of ESG that matter most to their stakeholders, while meeting current reporting requirements and planning and preparing for the future.

According to an independent study by Forrester Consulting, the ROI of Diligent ESG was 167% over three years.

The study also identified time savings of 60-80% thanks to the automation and centralisation of data collection and reporting, as well as a 50% reduction in auditing costs over three years.

Amanda Carty, General Manager, ESG & Data Intelligence at Diligent, says ESG has risen in the consciousness of corporate boards, employees and communities as they challenge organisations to have a more positive impact on the world around them. At the same time, regulations and disclosure requirements have become increasingly complex.

She says organisations need the right tools in place to steer their ESG strategy, and believes this research reveals the ROI Diligent ESG drives as executives look for the clarity and confidence to support investments amid economic uncertainty.

With Diligent ESG, organisations can:

• Pull ESG data from records, surveys and spreadsheets across the organisation.
• Get a complete picture of their ESG data, without duplications or gaps.
• Ensure consistent disclosures across multiple frameworks.
• Track ESG data against a variety of standards.
• Deliver updates to executives, board members and stakeholders through visual storyboards and dashboards.
• Monitor compliance, public perception, third-party risk and progress 

To learn more about how your organisation can prepare for new climate disclosure requirements and save time and money, download the full Forrester TEI of Diligent ESG report at www.diligent.com/en-au