The rules applicable to banks, credit unions, building societies and insurers will remain as they are.
Altogether, the number of entities to be required to make climate-related disclosures is expected to fall from 164 to 76.
The point of mandatory reporting is to prompt businesses to consider the effects of climate change in their operations – including their investment decisions.
Commerce and Consumer Affairs Minister Scott Simpson said that while the regime’s intentions were solid, the rules were too onerous and may be deterring companies from listing on the NZX.
Simpson also wants to loosen the regime so that directors will no longer be personally liable if their companies break the rules.
Under the proposed changes, reporting companies will not have to show the same level of evidence for climate disclosures as they do for financial disclosures.
“This recognises that climate reporting involves future-focused and uncertain information, unlike financial reporting, which draws on historical information,” Simpson said.
The changes will be included in the Financial Markets Conduct Amendment Bill, which is expected to be passed next year.
Pragmatic or short-sighted?
Financial Services Council chief executive Kirk Hope said the changes would ensure climate disclosures remained meaningful without discouraging listings on the NZX or diverting capital away from productive investments.
However, Mindful Money co-chief executive Barry Coates saw them as a major step backwards.
He said companies and fund managers had spent years preparing for the regime.
“This is the time to reap the benefits, not to throw out the requirements,” Coates said.
“These changes are out of step with the requirements facing our exporters, companies seeking to attract international capital and our New Zealand-based managed funds ... This is also yet another sign to international audiences that New Zealand is backing off its commitment to take action on climate change.
“It appears that we will only discover how valuable our international reputation is when we have lost it.”
The NZX’s general manager of corporate affairs and sustainability Simon Beattie welcomed the changes.
He said having directors personally liable for breaches “tilted the purpose of the regime from driving climate action, capital allocation and addressing risk to one too focused on compliance and mitigating risk to company board members”.
“The effect has been to impose significant costs to listed companies in assurance, consultants and legal advice.”
Beattie claimed he had heard from companies that were hesitant about listing on the stock exchange because of the rules.
Rules around investments in unlisted assets strengthened
Separately, Simpson is proposing to require fund managers, including KiwiSaver providers, to be more transparent about the investments they make.
Under the proposed changes, they will have to disclose whether their investments are in listed or unlisted assets, in New Zealand or offshore.
“The current lack of visibility makes it hard for investors to see how and where their savings are invested,” Simpson said.
“Greater transparency is an important step towards increased private asset investment.
“Globally, more capital is moving into unlisted assets, and we are seeing the same trend here. Better information will help investors understand these opportunities.”
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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