New Zealand is the first country to make the Task Force on Climate-related Financial Disclosures (TCFD) mandatory with the The Financial Sector Amendment Act 2021 now in effect. Affected organisations are required to publish disclosures from financial years commencing on or after 1 January 2023.
Companies listed on the New Zealand Stock Exchange (NZX) will be required to disclose their climate-related financial risks in accordance to the recommendations of the TCFD. Other organisations included as per MfE are detailed below:
All registered banks, credit unions, and building societies with total assets of more than $1 billion.
All managers of registered investment schemes (other than restricted schemes) with greater than $1 billion in total assets under management.
All licensed insurers with greater than $1 billion in total assets or annual premium income greater than $250 million.
Listed issuers of quoted equity securities with a combined market price exceeding $60 million.
Listed issuers of quoted debt securities with a combined face value of quoted debt exceeding $60 million.
The TCFD is an international framework established by the Financial Stability Board (FSB) to assist companies in disclosing information related to climate-related risks. These risks include physical impacts such as extreme weather events, as well as risks related to the transition to a low-carbon economy e.g. changes in regulations and shifts in consumer demand. The framework is designed to provide investors, lenders, and insurance underwriters with the information they need to assess the potential financial impact of climate change on a company's operations.
What this might mean for you? Well, this act has potential implications on businesses who haven't measured their emissions, have high emissions, or don't know their climate related risks. Financial institutions are already encouraging positive change with low interest rates (for green investment) and it is believed that banks will likely be charging higher interest rates to companies with high climate related risks in the near future. We foresee that this change will have a ripple effect on the whole economy as downstream businesses become motivated to reduce their emissions and climate related risks.