Climate-related Disclosures Final Consultation

The XRB is intending to issue Aotearoa New Zealand Climate Standards in December 2022. This means that the effective date would be annual reporting periods beginning on or after 1 January 2023.
The assurance of GHG emissions is effective for reporting periods that end on or after 27 October 2024. This date is set in legislation.

Both the XRB (as standards setter), and the Financial Markets Authority (FMA, as regulator) are aware this is a new area of reporting. The FMA has stated that it does not expect perfection from day one and understands that as entities become more practiced with the standard, the quality of reporting will improve over time. The FMA envisages taking a broadly educative and constructive approach, with a focus on issuing high level guidance on compliance expectations in the early stages, moving to a proactive regulatory role as the CRD regime becomes established. The FMA’s enforcement approach during the early years of the CRD regime will focus primarily only on serious misconduct as the sector learns and builds capability. More information can be found in the FMA’s Implementation Approach.

There is potential civil and criminal liability for contraventions of the CRD regime as set out in the new Part 7A of the FMC Act.

The XRB Board have committed to begin a post-implementation review of the climate-related disclosure framework no later than December 2025.

Please see our ‘resources’ webpage (https://xrb.govt.nz/standards/climate-related-disclosures/resources/) for information on how to get started. We encourage all climate reporting entities to get started as soon as possible to develop their understanding of identifying, managing and disclosing climate-related risks and opportunities.

The disclosure of sustainability-related or nature-related financial information is not currently mandatory in New Zealand. However, entities that are leaders on sustainability or those that are in particularly exposed sectors may consider it appropriate to disclose material sustainability-related or nature-related information to users as part of their wider reporting. Climate reporting entities must still comply with Aotearoa New Zealand Climate Standards, which are specific to climate-related disclosures. The XRB is monitoring global trends in sustainability reporting and currently has the authority to issue non-binding guidance on such matters.

Yes. In recognition that it may take time to develop the capability to produce high-quality climate-related disclosures, the XRB Board have developed a first-time adoption standard. This is [Draft] Aotearoa New Zealand Climate Standard 2: First-time Adoption of Aotearoa New Zealand Climate Standards (NZ CS 2). This standard provides specific, targeted relief in relation to some of the disclosure requirements in [Draft] NZ CS 1 and [Draft] NZ CS 3.

The level of detail will vary depending on an entity’s own specific circumstances; however, entities must provide all material information to primary users (what is material is defined in NZ CS 3). As capability is developed, we expect disclosures to become more sophisticated over time. See our accompanying draft staff guidance for further information.

By having a consistent set of required disclosures, comparability will be significantly improved across climate reporting entities. However, it is important to note that many of the disclosures will not be directly comparable at a disclosure level. For instance, scope 3 emissions at an entity level cannot be ‘added up’ and directly compared. It is possible, however, to compare whether or not an entity has made a disclosure and the type of information which they have disclosed.

There are no blanket exceptions. However, if an entity is concerned that the disclosure of particular information is commercially sensitive or confidential, an entity still needs to disclose the information in question but can consider disclosing it at a higher level. This avoids the disclosure being commercially sensitive but still supports users’ decision making. This is consistent with the TCFD recommendations and outlined further in the XRB draft staff Guidance.

Scenario analysis is a tool designed to be used in cases where data are not readily available, and uncertainty abounds. The TCFD and others emphasise scenario analysis as being central to climate-related risk and opportunity disclosure precisely because we don’t have rich and informative data on the future implications of climate change. Scenarios are, at their heart, qualitative descriptions of plausible futures—good quality data will enhance the robustness of those descriptions over time, but the absence of data does not constrain our ability to develop decision-relevant scenarios.

Connect with peer entities in your sector, industry associations and peak bodies such as the Aotearoa Circle or the Sustainable Business Council. If you would like further information about how the XRB has been involved in facilitating sector-level collaboration, please email climate@xrb.govt.nz.

The requirement to disclose how an entity is adapting is still covered in NZ CS 1. However, based on feedback and the international direction on transition plans, the XRB expects adaptation to be covered in transition planning. See our accompanying draft staff guidance for further information.

In year one of reporting, if an entity does not have a transition plan, it can make use of the relevant first-time adoption provision (see NZ CS 2). However, this will still require the disclosure of progress towards developing a transition plan. If an entity does not have a transition plan, it will be free to disclose this fact (that is, disclosing the absence of any transition plan aspects of its strategy would meet the disclosure requirement). Climate reporting entities should however be aware of the growing demand for transition plans, and that a lack of a transition plan may feed into capital allocation decisions made by primary users. Resources are available outlining investor expectations on transition plans. See our accompanying draft staff guidance for further information.