Home / Regulatory & Government / ICNZ seeks graduated climate change reporting
16 May 2022
The Insurance Council of New Zealand (ICNZ) has proposed a more graduated approach to reporting climate change impacts on financials, as disclosure rules are considered ahead of new reforms coming into effect.
The New Zealand External Reporting Board (XRB), which is responsible for accounting, auditing and climate standards, has been consulting on disclosure as part of action to understand and mitigate potential financial risks.
ICNZ says in a submission that it supports disclosures but proposed plans will create challenges for climate reporting entities (CREs).
“Overall, the XRB’s draft is weighted to requiring the maximum information to be disclosed from the outset in most instances,” it says. “We question whether the XRB has fully anticipated how much work and resource this will require of CREs, many of whom will be starting from a reasonably immature base.”
ICNZ proposes a three-year approach, introducing qualitative reporting as a minimum in the first year, quantitative date on actual impacts from the next year and year three requiring both actual and potential quantitative impacts.
The expected level of disclosure would also create tensions between what is commercially sensitive to support a competitive market, and what is needed to inform users of the information, it warns.
“We would also recommend more guidance and examples to assist CREs to get the balance right between confidentiality and disclosure,” it says.
The XRB aims to issue its first climate standard in December, paving the way for entities to make disclosures alongside wider year-end reporting next year at the earliest.
Firms affected would include large listed companies with a market capitalisation of more than $NZ60 million ($54 million); large licensed insurers, registered banks, credit unions, building societies and managers of investment schemes with more than $NZ1 billion ($906 million) in assets; and some Crown financial institutions.
“ICNZ members in particular recognise the need to focus more on climate change and emissions reduction, given the effect we are already seeing through increasingly severe and frequent weather events,” the submission says.
“Our feedback here is not intended to detract from the level of ambition, and our country’s net zero goal, but to manage the technicalities around reporting of this information.”
The Reserve Bank of New Zealand says climate-related risks will have a significant effect on the economy and financial system and it is “a strong supporter” of XRB’s work in implementing climate-related disclosures.