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Banks, insurers, NZX-listed companies and fund managers among those to be required to report on climate risk under new regime to be overseen by the FMA 

Banks, insurers, NZX-listed companies and fund managers among those to be required to report on climate risk under new regime to be overseen by the FMA 
James Shaw

Cabinet has agreed to require large banks, insurers, NZX-listed companies, fund managers and Crown financial institutions to make annual climate risk disclosures.

These will cover governance arrangements, risk management and strategies for mitigating any climate change impacts. Businesses that don’t make the disclosures, will be asked to explain why.

Climate Change Minister James Shaw said: “What gets measured, gets managed - and if businesses know how climate change will impact them in the future they can change and adopt low carbon strategies.”

The External Reporting Board will develop reporting standards based on the international Task Force on Climate-related Financial Disclosures framework.

The Financial Markets Authority will monitor and enforce the regime. Legislation (the Climate Change Financial Regulation Amendment Bill) giving it this power is yet to go through Parliament.

The requirements are expected to be in place by 2023 at the earliest.

The regime will apply to:

  • Registered banks, credit unions, and building societies with assets of more than $1 billion
  • Managers of registered investment schemes with at least $1 billion of assets under management 
  • Licensed insurers with at least $1 billion of assets under management or annual premium income of more than $250 million
  • Equity and debt issuers listed on the NZX
  • Crown financial institutions, like ACC and the NZ Super Fund, with more than $1 billion of assets under management

Overseas incorporated organisations won't be exempt from making disclosures.

The $1 billion threshold will see about 90% of assets under management in New Zealand fall under the regime. Around 200 organisations are expected to be affected.

Shaw said New Zealand will be the first country in the world to require the financial sector to report on climate risk.

“Australia, Canada, UK, France, Japan, and the European Union are all working towards some form of climate risk reporting for companies, but New Zealand is moving ahead of them by making disclosures about climate risk mandatory across the financial system,” Shaw said.

The announcement follows the Ministry of Business Innovation and Employment and the Ministry for the Environment consulting on the issue in 2019.

The Reserve Bank has for some time also been talking about the need for a more robust climate risk disclosure regime.

According to a survey it did of a sample of New Zealand banks and insurers (and published the results of in 2019), all banks and 90% of non-life insurers saw climate change as a risk to their business.

For more on Shaw’s thinking on the matter, listen to an interview he did with former Bank of England Governor, Mark Carney, on one of the episodes of his What comes after what comes next podcast.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

72 Comments

There is precious little that doesn't contribute. Roll on the discussion.

https://www.youtube.com/watch?v=11LJBsTugWo

Worth every minute of watching, Jenee. He's a techno-optimist; too much for me towards the end. But the picture is painted up front, the best I've ever heard it.

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I stopped when I saw "Green New Deal". If I wanted to live in a socialist utopia I'd move to Venezuela.

We need a public honour roll of such anti-socialists who stand for their principles and opt out of the pension.

As long as they get a lower tax rate to compensate, then sure.

Fair enough, though I'd doubt many would, any more than would forgo central support for house prices or embrace libertarian values in land zoning.

That's the point I hark to: folk espouse philosophies that when it comes to the crunch and their own hard times they're not often prepared to embrace. Too often it simply ends up being privatising the profits and socialising the costs at the corporate level, and socialism for me and capitalism for thee at the individual level.

At the rate that costs of living are increasing, the pension will be a mere drop in the bucket anyway. To rely on it for retirement IMO is foolish.

Well, yeah, it was certainly envisioned to be aligned with someone having their house paid off. Now we're socially supporting house prices though it doesn't leave as much wiggle room for folk coming through.

My nan has a freehold house but struggles still. We get gouged on everything here in NZ - food, power, fuel, rates etc.

Maybe the same for those who put their kids in private schools, or pay medical insurance?

It's an interesting discussion. Imagine the cost of private medical insurance were it funding all your care rather than just a little on top. It would certainly make for-profit insurers companies to buy shares in, and bankruptcy courts would end up with a bit more work in future.

The American experience.

I'd certainly agree it's time we stop subsidising property investment, though. That one does not seem to make much sense.

you're confusing socialism with social policies.

Using the term loosely as it is widely these days. But yes, absolutely while it's common it's incorrect.

The term New Deal is highly appropriate - carbon neutral and climate change are in all aspects an economic phenomenon. All the signs are there, the fact that investment banks and hedge funds are so financially invested. This is about generating economic activity in mature Western economies, your perfectly functioning ICE car will be legislated of the road so you have to buy an EV, you have to buy solar panels, you have to buy a battery and so on.

npc - try and divest yourself of your assumptions. One could drive a truck though them.

@npc - feel free, nothing stopping you

Seems like a pretty logical step.

If I paint the exterior of my building Green, can James Shaw and his mates pay for the rest of the renovations. It will be under the $12m cap he has approval for.

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That is absolutely non-sense.

Green is so over in this election.

Many commenters seem not to have read the article and believe a head-in-the-sand approach to risk to be superior.

The announcement follows the Ministry of Business Innovation and Employment and the Ministry for the Environment consulting on the issue in 2019. The Reserve Bank has for some time also been talking about the need for a more robust climate risk disclosure regime.

When insurance companies and investment funds are already considering climate change impacts you would think it's time for more in society to be aware that it's important to think about the future when making decisions in the present.

Xin, I'm also surprised to see you in such opposition to your own dear emperor on climate change: https://www.reuters.com/article/us-climate-change-china-idUSKBN1W906Y
Are you not up to date on the party line?

Yes it was interesting to hear James Shaw in the live stream state that 74% of the 200 submitters from the financial sector wanted this legislation to be mandatory, as they felt it would disadvantage them if it was only voluntary.

Be interesting to see the size of the organisations on either side of this. For large organisations, the capacity to hold or acquire the resource required to implement this would certainly benefit them over smaller organisations. Anyway, customer always pays at the end of the day.

I don't have the link but it's worth watching the video stream of James Shaw announcing it - the question time afterwards had good discussion around public/private assessment of risk, particularly around things like property etc. The idea of an 'Adaptive Act' for instance was interesting - to address the multiple complexities involved.

Easy.
Look at the Ecan climate modeling to 2100.

https://ecan.govt.nz/your-region/your-environment/climate-change/climate...

Nil returns all round.

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Virtue signalling BS.

Overly simplistic denigration avoids complex reality.

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"We're going paperless, agile, work from home and at some point we might whack some solar on the head office roof if there's enough tax credits in it for us".

There, I just spared you reading almost every NZX's climate mitigation disclosure for the next twenty years.

Why not ask what risk economic growth poses for our future?

This pussyfooting around is unfortunately typical of our current dialogue as the non-negotiable limiting factors to growth slap us about the face. eg. drought, fires, fish stock depletion, water quality degradation etc.

For example, the Reserve Bank printing like crazy so we can get the NZ economy powered up by burning 2 million odd barrels of oil a week. Or big biz and the Nats wailing to let in more migrants. All sectors of government and opposition proposing, or acting, to make the situation worse.

Nowhere in the political sphere do we hear what is genuinely required to solve the problems, because the general public wont accept them at the moment.

Filling in these forms to assess risks for individual firms is a waste of time when the system itself is the problem.

Greens need to go.

These nutters may well end up holding the balance of power after election night. Isn't MMP great.

For nutters, read: 'anyone who puts a spoiler in my need to project myself via my consumption'.

I feel sorry for you.

Anything the Greenns say iis just lip service anyway, they just can't deliver.

well.. u say hold the balance of power... but they have ruled out working with National.. havent they? So what choice do they have?

This group of loonies are so cut of from real live its funny

sigh! This is pretty much every criticism of green party policy.

Don't even mention the policy, or alternative idea's. Just call them loonies, even if the idea is logical and being implemented by other governments that you wouldn't call loony.

Whatever you do, be careful not to actually read the articles.

Did you listen to the announcement? A lot of this is being driven by the financial sector themselves. NZ is not alone in legislation like this. Consider how insurance companies are already increasing premiums and/or refusing insurance in order to mitigate risk from climate change.

Greens always getting hammered for their lack of business knowledge, but it's just reactionary rubbish.

Well this will create quite the little industry for consultants!

Little - have you not seen the size of the Obama beach house? Lucky he healed the oceans.
"Interest in climate change is becoming an increasingly powerful economic driver, so much so that some see it as an industry in itself whose growth is driven in large part by policy making.
The $1.5 trillion global “climate change industry” grew at between 17 and 24 percent annually from 2005-2008, slowing to between 4 and 6 percent following the recession with the exception of 2011’s inexplicable 15 percent growth, according to Climate Change Business Journal."
https://www.insurancejournal.com/news/national/2015/07/30/377086.htm
https://www.townandcountrymag.com/leisure/real-estate/a30169311/barack-m...

New Zealand could go stone-age tomorrow and the developing world would pick up the slack by noon.

Why not focus our capabilities on developing climate friendly technology? Have more kids and educate them to the best of our ability, so that they can contribute solutions.

That's stupid - one problem is consumption; exponential and of a finite planet. The obvious codicil is: per head. So more children is a stupid idea - as demonstrated by family size per IQ, if you look.

Sure, contribute solutions, but how about you, now? After all, it's you, now, causing the problem. Why should they fix if for you and why later?

Did the can go far? Sore toe?

How do you know I'm part of the problem? Maybe I'm pretty lean with respect to emissions.. working from home, building software that makes business more efficient (and therefore less resource hungry). My children are bright and will be a positive contribution to the world. This is a generational problem that I'm sure humanity will solve.

There's little value in New Zealand stifling productivity through pointless virtue-signalling green edicts. Better to be productive, fertile and happy. Cheer up - it'll be OK.

'Virtue signalling' = anything that confronts me in terms of my personal lifestyle choices.

I repeat; Stupid.

> So more children is a stupid idea - as demonstrated by family size per IQ, if you look.
Have you mentioned that to Marama Davidson ?
And how can you support a party led by such an obvious idiot ( by your own definition I stress ) ?

Great stuff! Another added cost to business which will drive up consumer costs too. And for what? An imaginary threat. My degree from the University of California was in environmental sciences. What the so-called Green party--who are Marxists pretending to be environmentalists--are saying has no basis. If they get any real power, they will utterly destroy New Zealand's first world economic status. We will be the next Venezuela.

You should have studied wider. And divested yourself of some false assumptions.

Perhaps a physics paper might have helped.

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this guy gets it. They know socialism cannot compete with capitalism, so they've pivoted to attacking capitalism indirectly with legislative burden dressed in green.

Did you actually listen to the announcement and questions? You're slinging mud at the wrong people. This isn't some unresearched Greens policy - it came out of the Nats Climate Change Technical Working Group and had 3/4 support to be mandatory by its financial sector consultation group.

Marxist greens? Would you say the same of our financial sector or the Nats??

I would. Probably with a different reasoning tbf.
More along the lines, socialism is for the rich, capitalism is for the poor. Hence the involvement of the financial sector.

Ah.. The socialist National party of Aotearoa. Must remember to tell the Nats PR company..

It'll just amount to a bland statement with some numbers in annual reports that noone reads.

Truth be told, climate change is already a discussion point for all directors and this will simply be another unnecessary unread measure appearing in annual accounts.

Just looks like James Shaw looking after his old PWC mates who will have some consultancy work on the back of this.

Just to clarify - Greens a bunch of loonies who don't know the first thing about business OR James Shaw co-leader of the Greens is working on pointless project so he can get more business with his PWC mates?

No mention then of expectations of either the general public or shareholders? No possible interest in stranded assets? Corporate responsibility merely dry risk mitigation statistics? Yeah. Right.

Did I call the greens a bunch of loonies?

My expectation as a shareholder is I'd much rather have directors who have a civil liability concerned with climate change and carbon footprints than a govt mandated statement and conflated measures that make little sense and appear in an annual statement that noone reads.

I wasn't referring to you per se, but the wider discourse around the Greens.

Fair enough on your expectation as a shareholder. We disagree it seems on mandatory vs voluntary and on 'no-one reads' - many of us do read the details, and expect public visibility on what is an increasingly complex risk management situation.

So you want companies compelled to provide an estimate of how an uncertain long dated scenario might affect possible scenarios going forward?

>Just to clarify - Greens a bunch of loonies who don't know the first thing about business OR James Shaw co-leader of the Greens is working on pointless project so he can get more business with his PWC mates?

Both are correct. He gets his votes from the loonies . His plan B for if / when he is kicked out from Parliament is a cushy "consulting" career.

Right. Votes from loonies who insist on quadruple bottom line accounting, delivered by person who can work in consulting firm. Hmmm.

*

The Greens said ...... it's a waste of time even listening, one half oof what they say is total crock and the other half that could make a difference, they can't manage it from conception to implimeation.

Didn't read the article and who was advocating for this?

I am confused. I thought that with the dissolution of parliament the time for announcements of government policy was past - after all, any semblance of a coalition is gone. Was this announcement made by James Shaw as Climate Change minister or by James Shaw as Green Party leader?

Usual right wing reactionary rubbish in the comments. Dinosaurs.

OK boomer.

Not just right wing; disingenuous. I guess it goes with the territory, but it never ceases to amaze. One wonders what they hope for?

JP - as one of the more intelligent hereabouts, have a look at the link I put up at the top of the thread (that suggestion goes for anyone above mantra-bleating level). The first half is the predicament laid out in as logical fashion as I've ever seen. He advises the EU, Merkel, etc; he's right up there. I don't happen to agree with the technocopian urgings in the last half - he clearly knows enough about energy to disprove what he offers.

I thought Parliament had risen for the year? How is new policy still being enacted now?
Good to see the Greens further alienating Businesses by forcing them to be first mover virtue signallers. Only need a few more off-the-wall policies and Greens will cease to exist

Business, collectively, is (has been thus far) the process of extracting and/or drawing down resource stocks and sink capacities. It also tries to avoid paying it's way (calling things externalities, duck-shoving costs - which exactly why you, here, now. You're here, now, on behalf of duck-shoving.

Given the point we are in the trajectory of human affairs (you need to watch that lecture too), worrying about 'business' is the least of your worries.

Your crystals need polishing, your windchimes need dusting and the Green school in the 'naki want someone to weed around the maypole. Funny how you constantly blather on about finite resources but are quite happy to use the same resources to peddle your inane and clearly monocular views

PDK: I would agree that the world is overpopulated and very wasteful with finite resources, unfortunately you just come across as a patronising, condescending crank!

Chuckle. At this stage in the game, it doesn't matter a rodent's behind what I come across as. We need to be having the debate and I'm making it happen.

No, you just come across as a constant loop tape playing the same track... blah,blah,blah ad infinitum. What's the definition of insanity again??

Shovelling coal on the Titanic, I'da said.

Translated: Practicing agriculture in New Zealand (everything outside organic/regenerative).

And it the Titanic is going down, is it going to stop going down because you stop broadcasting 'Abandon Ship'? I suggest you just don't want to know because what I warn of is going to upset your particular applecart.

Climate change was so yesterday ...we have house prices to save us :P

Days to the General Election: 19
See Party Policies here. Party Lists here.