New Zealand Becomes First Country To Force Financial Firms To Act On Climate Risks | New Zealand
New Zealand became the first country in the world to pass a law requiring financial institutions to disclose and, according to the government, act on climate-related risks and opportunities.
“We have the opportunity to pave the way for other countries to make climate-related disclosures mandatory,” Climate Change Minister James Shaw said. âNew Zealand is a world leader in this area and the first country in the world to introduce mandatory climate reporting for the financial sector. “
The new rules will apply to large insurers, banks, publicly traded companies, listed issuers and investment managers. At present, most of these large New Zealand entities provide little information on what the climate crisis and global warming could mean for their future operations. By forcing them to disclose this, the law hopes to ensure that the effects of the climate crisis are consistently factored into business, investment, lending, and insurance underwriting decisions.
âClimate-related disclosures will place climate risk and resilience at the heart of financial and business decision-making,â Shaw said. âThis will encourage entities to become more sustainable by factoring in the short, medium and long term effects of climate change in their business decisions. “
âThis bill will require around 200 of New Zealand’s largest financial market players to disclose clear, comparable and consistent information about the risks and opportunities that climate change presents to their businesses. In doing so, it will promote business certainty, raise expectations, accelerate progress and create a level playing field, âTrade and Consumer Affairs Minister David Clark said in a statement following the adoption of the draft. law in third reading Thursday.
James Shaw said the legislation was one of many steps the government has taken to meet its 2050 emissions targets required by the 2002 Climate Change Response Act. New Zealand has so far been very poor in meeting its climate targets.
The country is one of the worst in the world on emissions increases. Its emissions increased by 57% between 1990 and 2018, the second highest increase of any industrialized country. Earlier this year, data showed New Zealand’s emissions increased by 2% in 2018-19.
While a number of countries introduce similar legislation or regulations, officials said New Zealand’s law was the first to require companies in the financial system to report their climate exposure to investors. In June, France sets new goals which will require investors to declare how green their assets are and set greenhouse gas emissions targets every five years from 2021 – and was the first major economy to make the rules binding. Similar rules are in the works in the UK and are expected to come into effect in 2025.
When Shaw first asked for the bill last year, he said that âAustralia, Canada, [the] The UK, France, Japan and the European Union are all working on some form of climate risk reporting for businesses … But New Zealand is moving forward by making climate risk disclosure mandatory in the whole financial system.