New Zealand has introduced a new law that will require all financial institutions to report the impacts of climate change on their businesses. Companies within the financial sector, like banks and insurers, must give a detailed report of climate change impacts on their businesses as well as information on how they handle climate-related risks and opportunities.
New Zealand’s Commerce and Consumer Affairs Minister David Clark said in a statement that all sectors of the country must participate in addressing climate change.
“It is important that every part of New Zealand’s economy is helping us cut emissions and transition to a low carbon future,” Clark said. “This legislation ensures that financial organisations disclose and ultimately take action against climate-related risks and opportunities.”
The legislation now makes New Zealand the first country in the world to introduce a bill requiring financial institutions to account for climate change in their reports. The law will target banks and insurance firms with assets or assets under management exceeding $703 million USD. Further, all equity and debt issuers listed on New Zealand’s stock exchange will also be required to submit the same report.
Climate Change Minister James Shaw said that it is not possible to reach climate change targets unless financial institutions get involved.
“We simply cannot get to net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate,” Shaw said. “This law will bring climate risks and resilience into the heart of financial and business decision making.”
Once the law passes, over 200 companies in the country will be directly subjected to the new guidelines. Each report will be providing details of expected environmental impacts for the coming year. This means the first report will be made in 2023.
“Many businesses face significant physical and transitional risks relating to climate change, and while some businesses have started publishing reports about how climate change may affect their business, strategies and financial position, there is still a long way to go,” Clark said.
New Zealand has set various targets toward attaining a carbon-free country. It is aiming for a net-zero public sector by 2025, and the entire country is expected to reach zero emissions by 2050.
Image via Michal Klajban