Submission on climate-related disclosures timing challenges

Timing challenges for new climate statements

The Financial Markets Authority released a proposal in July to provide a one-month extension on the requirement for climate reporting entities (CREs) to include climate statements in their annual report.

Some 200 large publicly-listed companies, insurers, banks, non-bank deposit takers and investment managers covered by the Financial Markets Conducts Act 2013 (FMCA) are classified as CREs. They are required to start making climate-related disclosures from financial years commencing on or after 1 January 2023.

Under the FMCA, climate statements must be prepared and lodged within four months after a CRE’s balance date. However, some CREs are facing a timing challenge because they are subject to financial reporting obligations that mean climate statements would need to be prepared within three months.

The IoD made a submission on the proposal highlighting both our support for the use of exemption powers by the Financial Markets Authority, but also highlighting ongoing concerns around timing, assurance impacts, and potential scope expansion.

A key consideration is that the timing of disclosures also needs to take into account further changes to the reporting regime including the introduction of greenhouse gas (GHG) emissions assurance requirements from October 2024. Additionally, the Ministry of Business Innovation and Employment (MBIE), in conjunction with the Ministry for the Environment, released a consultation document earlier this year outlining a possible scope extension of the assurance requirements and the introduction of an assurance occupational licensing regime.

Aligning with our original submission on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 (CRD Act), in our MBIE submission we reinforced timing challenges and suggested a six month timeframe to prepare climate statements. We also noted concerns over maturity of the assurance sector and their ability to meet timing requirements.

All of these factors put additional pressure on the ability of CREs to meet the timeframe, potentially well beyond the proposed two-year exemption period.

The IoD continue to support climate-related disclosures and the educative approach that the FMA plans to undertake to support CREs to meet compliance expectations. However, we consider that the timing challenges may continue beyond the two-year timeframe, so the post-implementation review of NZ Climate Standards 1 to 3 (anticipated to begin December 2025) provides a good opportunity to consider the ongoing impacts to CREs.