Submission on Aotearoa New Zealand Climate Standard 1: Climate-related Disclosures (Strategy and Metrics and Targets)

The External Reporting Board (XRB) has released a second consultation document on the climate-related disclosure standards. The first consultation document, released late last year, related to the Governance and Risk Management sections of the proposed standard. This second consultation covers the Strategy and Metrics and Targets sections.

Background

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. The new Act provides for XRB to develop climate standards as part of the climate-related disclosure framework. Last year XRB released a consultation document focussing on the first stage of the consultation, the Governance and Risk Management sections of the standard. We submitted on the first consultation. The second consultation focusses on the proposed Strategy, and Metrics and Targets sections.

Summary of our submission

The key points of our submission are:

• We continue to support the XRB in their development of the climate-related disclosure standards. It is important that the regime enables effective, meaningful reporting that helps drive strategic thinking and change. The Strategy and Metrics and Targets sections of the standard will provide climate reporting entities (CRE’s) with a greater understanding of the implications of climate change on their organisations, and will also assist boards in the wider governance considerations relating to the strategy, purpose and risk management of their organisations.
• We welcome XRB’s acknowledgement that some entities may only be able to initially disclose a limited understanding of the impacts of climate change.   While many CRE’s have already developed reporting frameworks, some are only just beginning.  It is important that the focus is initially on supporting and encouraging CRE’s to meet their reporting obligations and to provide guidance and education to help build capability and competence.

While challenging, there are benefits for organisations from the broader reporting of greenhouse gas (GHG) emissions proposed. Requiring the disclosure of all scope 3 GHG emissions will be particularly challenging for some entities to start with and understanding will be required. A comprehensive approach to disclosing GHG emissions, however, will add value in the long run by contributing to a better understanding of an organisation’s value and supply chains.