Submission on Aotearoa New Zealand Climate Standard 1: Climate-related Disclosures

XRB has released a consultation document on the topics of governance and risk management, comprising the first stage of their development of climate-related disclosure standards.

In October 2021 the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill passed into law, broadening non-financial reporting, by requiring and supporting the making of climate-related disclosures by certain climate reporting entities.

We submitted on the Bill and we note some changes were made to the Act, including excluding smaller issuers, providing a longer lead in time for assurance requirements and removing the disclose or explain provision.  

The new Act provides for XRB to develop climate standards as part of the climate-related disclosure framework. XRB has released a consultation document which focuses on the first stage of the consultation, the Governance and Risk Management sections of the standard. (The next XRB consultation in March 2022 will focus on the proposed Strategy, and Metrics and Targets sections).

In our submission we support the approach the XRB is taking to developing climate-related disclosure standards, including, in particular:

• starting with the Governance and Risk Management sections which will allow boards to begin work to ensure they have the right governance structure, processes, skills and experience in place to meet their obligations
• focusing the standard on high level areas of disclosure, rather than being overly prescriptive.
• the staged consultation process. This will allow organisations to get started immediately, which is important as the timing around the introduction of the regime is tight.

We also support the XRB’s approach in the Governance section to not require disclosure of specific climate-related skills and competencies of individual board members. We note that while it is important that boards have an appropriate understanding of climate-related issues within their organisation, boards need the flexibility to create a diverse group with the relevant knowledge, skills, experience and background suitable for the organisation overall.

To help ensure an effective and successful reporting regime, we encourage the XRB to:

• ensure the standards result in meaningful reporting that is:
  • relevant and of value to a wider group of stakeholders as well as the intended primary users
  • appropriate to be applied to a wider group of reporting entities should the regime be expanded at a later date.
• ensure the standards remain consistent and aligned with other national and international reporting frameworks, and in particular with the climate-related disclosure standard expected to be developed by the newly formed International Sustainability Standards Board
• provide sufficient guidance, education and support for entities to develop capability and competence and ensure they are in a position to make meaningful disclosures.

We also stress that it is important that the reporting regime does not become a compliance exercise, that it goes beyond compliance and enables effective, meaningful reporting that helps drive strategic thinking and change