Mandatory climate reporting: Experiences from year one of New Zealand's regime

New Zealand was the first country in the world to pass legislation mandating its largest finance market participants to undertake climate reporting, and many climate reporting entities (CREs) are now entering their second year of reporting. 

Throughout the first year of reporting there has been significant analysis from a range of perspectives highlighting opportunities gained and missed, various challenges and areas where the disclosures could be enhanced. 

Being world leaders in mandatory climate-related disclosures has resulted in directors, preparers, assurers and advisors experiencing a steep learning curve. This was true even for those who had been voluntary reporters for a number of years.

Challenges and benefits of climate reporting

In October 2024, Chapter Zero New Zealand and KPMG launched Lessons from the front line, a guide to help entities on their climate-reporting journey. The guide is based on real-world experiences from directors, preparers and users involved in the development of climate-related disclosures. Key insights of relevance for directors and regulators include: 

• Greenhushing risks: Many organisations chose to ‘say less’ to avoid accusations of greenwashing, raising concerns about ‘greenhushing’ – disclosing less to minimise legal risks.
• Challenges for pioneers: Without templates or best practices, New Zealand directors faced steep learning curves and resource constraints. For some, this meant diverting attention from other strategic climate initiatives.
• Emerging benefits: Reporting has deepened organisational focus on climate, improved governance alignment, and fostered cultural change. The standards’ organisation-wide approach built capability and accelerated progress for early-stage entities.
• Reframing reporting: Directors noted climate reporting should move beyond compliance, acting as a ‘carrot’ to understand and adapt to climate change impacts while building resilience.

“The value is in all the conversations that were had to generate the report — having the same minds and voices in the risk discussions, the strategy discussions, the reporting discussions. Reporting has brought alignment and understanding across some pretty technical areas of both strategy and climate risk.”

- Lindis Jones, Director Z Energy and Loyalty NZ, Lessons from the front line

The regulator’s perspective

Earlier this month, the Financial Markets Authority, the regulator responsible for market conduct in New Zealand and for monitoring and enforcing of the climate-related disclosures regime, released insights from its review of 70 climate statements for the reporting periods to 31 March 2024. Key observations on better practice included: 

Materiality: Undertake robust materiality assessments to ensure all information disclosure is material and relevant (i.e. avoid over-disclosing information that isn’t material).

Fair presentation: Ensure information fairly reflects the information presented and in a way that does not over-emphasise the positive, is ambiguous, unclear or vague.

Data and estimates: Disclose all material information in relation to underlying methods and assumptions, and any data and estimation uncertainty.

Disclosure requirements: Describe how climate-related processes were undertaken, including frequency, and explain how climate-related activities are connected with climate-related processes and other organisational activities. Explain the impacts of any climate-related events in the reporting period and be more specific when describing risks and opportunities (including materiality assessment). Clearly and transparently describe GHG emissions targets.

Scenario analysis: Explain the scenario analysis process including disclosing scenario narratives, all material information and the extent to which sector-level information has been used to informentity-level scenarios. Ensure that scenarios are distinct, plausible and challenging.

Consistency and coherency: Ensure that disclosures are consistent with other published information and vice versa, such as annual reports.

Lessons learned – a director’s perspective

The scale and complexity of completing mandatory climate reporting should not be underestimated. Boards needs be fully prepared and fully engaged in the process from the outset.

“Getting your head around it is the difficulty. You need to decide how much you want to change your business strategy out to 2050 and how fast you want to go. You need to know what everyone else in your sector is going to do, but it’s specific to you.

“You need to understand your organisation, what you control and what you can’t. You need to understand the level of engagement your customers and staff want. It’s a complex challenge.”

- John McMahon, Director NZX, Lessons from the front line

 

New Zealand directors have highlighted the following lessons:

1. Get your governance structures and processes in place and establish roles and responsibilities.
2. Make sure climate is on the board agenda regularly. Directors should be involved throughout the process as assumptions are tested and decisions reviewed. 
3. Understand what resourcing is required, what your organisation's capability and capacity is, and identify any gaps. Boards should do this to understand what is at stake and what resources are needed.
4. Establish what is material to your business and what value is at risk, including material risks and opportunities.
5. Understand what you will be required to sign off in your disclosure and ensure you are sufficiently involved or informed to do so.