New Zealand: Financial firms need to be educated about climate risks

Whether buying stocks from airlines, chemical companies, and large real estate companies, or buying private homes and pension funds: Almost every business that banks, insurance companies, and investment managers do has consequences for the climate. New Zealand is the first country on Earth to pass a law that also requires the financial sector to consider the impacts of climate change on its business – and to demonstrate the risks to its customers and shareholders.

All banks with assets in excess of NZ $ 1 billion, insurance companies with more than the corresponding amount of assets under management and all issuers of stocks and bonds listed on the country’s stock exchange will need to provide comprehensive information on the role of climate change in the future. Climate Secretary James Shaw said you cannot become climate neutral by 2050 “if the financial sector doesn’t know the impact of your investments on the climate”. “This law will bring climate risks and resilience into the heart of the financial and business decision-making process.”

The first reports are expected in 2023

The bill aims to oblige financial companies to explain how they deal with climate risks and opportunities. About 200 of the country’s largest companies and many foreign companies that have reached the $ 1 billion threshold will be affected by the law. The bill has already been submitted to Parliament and is expected to be dealt with in the first reading this week.

The “New Zealand Herald“It explains how the law is supposed to operate: for example, if an airport is built on a coast that is likely to be affected by sea level rise, the operator will have to inform the owners of these risks. Likewise, according to the newspaper, awareness is needed when assets suffer unexpected losses in value due to climate change – for example, shareholders in mining companies that coal investments can mean losses if the government switches to renewable energies.

The disclosure should be made in the annual reports for the fiscal years starting in 2022, once the law is passed. This means that the first corresponding reports from the companies are expected in 2023.

The New Zealand government announced last September that it will require the financial sector to report climate risks, and those who cannot provide the information will have to explain their reasons for doing so.

With this policy, New Zealand is responding to one of the major climate and environmental risks according to the World Economic Forum (WEF). The New Zealand government has also taken many measures to reduce carbon dioxide during her second term in office₂Emissions were introduced. It promised to make the public sector climate neutral by 2025 and to purchase emissions-only buses for local public transportation from the middle of this decade.