Legislation came into force on 1 January 2024 creating the Climate-related Disclosures Register.
Around 200 large Financial Market Conduct (FMC) reporting entities in New Zealand — known as climate reporting entities or CREs — are required to prepare climate statements and lodge them on the register. A comprehensive report by leading law firm Bell Gully The Big Picture: Climate Change – Navigating the risks takes stock of key climate developments and offers guidance for 2025 and beyond.
While smaller companies are not currently legally required to report on the impacts of climate change in New Zealand, they may still be encouraged to do so by larger businesses they work with — particularly if those larger companies have mandatory climate reporting obligations.
Climate statements from the major players will contain information about the effects of climate change on Climate Reporting Entities (CRE) including, for scheme managers, funds under their management.
This disclosure regime is designed to allow shareholders, investors and potential investors to be aware of the businesses’ exposure to climate change impacts and understand how these businesses are planning to mitigate them.
Bell Gully says businesses will need to continue to have a sharp focus on climate issues in 2025, with developments expected on multiple fronts.
But the insights learned from the first year of mandatory emissions reporting, and the path charted in other jurisdictions, can offer vital guidance.
This year, climate reporting entities will be required to disclose the transition plan aspects of their strategies, including how their business models and strategies might change to address climate-related risks and opportunities.
Legislation for a framework on climate adaptation is also expected in 2025, and there’s an ongoing focus on “misleading sustainability claims” around the world, both by regulators and those seeking change through the courts.
Bell Gully partner Richard Massey says it’s important for companies to keep on top of the particular issues that will affect them, and to take advantage of insights offered by trends in published climate reports and developing regulatory guidance.
When it comes to ensuring the accuracy of sustainability claims, a particular focus for Massey, it has become clear that “greenwashing” is becoming a much more complex risk for businesses to manage than some traditional regulatory risks.
“Ensuring accurate and substantiated representations of the environmental impact of goods or services is not just a legal obligation – it’s also becoming a business imperative given the reputational considerations involved,” he says.
“What we can see happening overseas, particularly a growing enforcement focus on issues like greenwashing, can provide valuable insights into what is to come in New Zealand. Businesses have an opportunity to learn from these developments to support their future strategies and build trust in a market increasingly focused on sustainability.
” There will be relief for climate-reporting entities in some areas following a recent confirmation by the External Reporting Board (XRB) that it will provide an additional year of relief from some of the reporting requirements, including the anticipated financial impacts of climate-related risks and opportunities.
But despite some initial consideration the XRB has decided not to defer transition planning requirements, which are now set to become mandatory during CREs’ second reporting period.
Meanwhile, new developments around climate adaptation will be a priority for many companies to assess, particularly in areas like infrastructure.
“We have seen the first glimpse of an adaptation framework with the release of the Finance and Expenditure Select Committee’s report from the crossparty Inquiry into Climate Adaptation this year, but with legislation expected in 2025, this year will be a big year.” said Bell Gully partner Natasha Garvan, who heads the firm’s environment and planning practice.
“There will be a lot for local government, communities, and businesses to process and understand once we have more clarity on New Zealand’s framework for addressing climate adaption.”
A climate change adaptation model for New Zealand
2023 saw a record-breaking number of climate-related disasters in New Zealand, with more than twice the number of states of emergency than any other year, and insurance pay-outs totalling more than the combined total of the previous 14 years.48 Events such as the Auckland Anniversary floods and Cyclone Gabrielle had major social and economic impacts. They brought home the need for New Zealand to focus efforts on adapting to the effects of climate change – from extreme weather events and rising sea levels, to changes in temperature.
But difficult decisions are still to be made as to who is going to pay for vital adaptation measures. It is promising that work is now underway to develop an adaptation framework for New Zealand, and in October the first glimpse of what might come emerged when the Finance and Expenditure Select Committee released its report from a cross-party Inquiry into Climate Adaptation.
Aimed at developing and recommending high-level objectives and principles
for the design of a climate change adaptation model for New Zealand, and to support the development of policy and legislation to address climate adaptation, the framework is intended to deliver a fair and enduring system to help ready New Zealand for climate change and provide clarity on costs.
Objectives and principles
The committee considered several aspects of a potential framework including government input, societal costs, fairness, Te Tiriti o Waitangi, funding and compensation.
It recommended a number of objectives to guide the framework.
