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FMA outlines how it will monitor climate reporting in draft guidance on record keeping

In a draft guidance on climate related disclosure (CRD) record keeping, the Financial Markets Authority, says it will take an ‘educative and constructive approach’ to monitoring.

Saturday, June 24th 2023, 8:39AM 2 Comments

by Andrea Malcolm

The FMA has put three documents up for consultation, aimed at helping climate reporting entities (CREs) meet their obligations to publish climate statements on their greenhouse gas emissions, the risks and opportunities imposed on them by climate change and their response.

The watchdog says in the first three years it will initially focus on high-level guidance on compliance expectations, and move to a more proactive regulatory role as the regime becomes more established. In the second year, the FMA will aim to support development of best practice and the third year will aim to be a steady state of guidance, monitoring and enforcement.

It expects a high level of public interest in climate statements, meaning it will need to respond to a high volume of enquiries and complaints and any enforcement action will be considered on a case-by-case basis.

The full set of documents the FMA has released are guidance for keeping proper CRD records, an outline of its CRD monitoring approach for the next three years, and the use of third party providers in CRD.

The proposed guidance for keeping proper climate-related disclosure records provides practical examples for CREs to meet their record keeping requirements under the regime. The record keeping guidance for CREs explains how the FMA will apply the law and describes the principles underlying the FMA’s approach.

It is organised along the four pillars underpinning the requirements each business must report itself against which include the role of their governing body and senior management, a risk management pillar on how they identify, assess and manage climate-related risk, a strategy pillar on how climate change is currently affecting them and how it might do in the future, and a metrics and targets pillar for measuring climate risk and opportunities, and GHG emissions.

CRD manager for the FMA Jenika Phipps, says the FMA accepts that the climate reporting regime is new, and the market’s ability to manage data sources and systems for collecting and reporting on climate-related information will improve over time.

The proposed guidance is open for consultation until 4 August.

The CRD regime will capture around 200 entities, with market cap over $60 million; registered banks, credit unions and building societies with total assets over $1 billion; licensed insurers with total assets over $1 billion or annual gross premium revenue over $250m; and  managers of registered schemes, such as Kiwisaver and investment funds, with greater than $1 billion in total assets under management.

The CRD legislation amends the Financial Markets Conduct Act 2013 (the FMC Act), the Financial Reporting Act 2013 and the Public Audit Act 2001 and inserts a new Part 7A to the FMC Act. 

Under the legislation, CREs will be required to prepare an annual climate statement in accordance with the climate standards issued by the External Reporting Board (XRB), get independent assurance about the part of the climate statement that relates to the disclosure of greenhouse gas emissions, make the climate statement available to the public and comply with record-keeping requirements.

Tags: FMA

« Climate reporting a scramble but collaboration will helpDevon offers short term global green bond fund »

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Comments from our readers

On 26 June 2023 at 9:41 am Pragmatic said:
I suspect we’ll look back on this climate reporting in years to come, with confusion & questions. Whilst there is no doubt that climate controls are increasingly important, I’m unsure whether the energy, effort & expense in producing these reports are the best use of resources &/or going to make a difference… although I’m sure that the ‘climate enthusiasts’ (& those who are positioned to make a buck from all of this) will have an opposing & vocal perspective
On 26 June 2023 at 4:28 pm Amused said:
“It (the FMA) expects a high level of public interest in climate statements, meaning it will need to respond to a high volume of enquiries and complaints and any enforcement action will be considered on a case-by-case basis.”

Why does the FMA believe this? None of New Zealand's biggest climate polluters are associated with the financial services industry.

Stats published by the Environmental Protection Authority in 2022 showed the biggest emitters were for milk, petrol, fossil (or natural) gas and meat businesses, with electricity, and steel companies rounding out the top group because of their fossil fuel use. By contrast, many of New Zealand’s biggest employers and profit makers (including banks, vineyards, telcos, healthcare companies and renewable energy providers) didn’t appear in the top climate polluter ranks because their emissions weren’t even high enough to qualify for compulsory reporting.

The new climate related disclosure (CRD) requirement for the financial services industry is yet another example of this Government adding unnecessary cost and complexity to business. Banks and insurers etc. will now have to hire more staff specifically to meet their new climate disclosure requirements and these costs will inevitably get past on to their customers. The New Zealand consumer continues to be saddled with additional costs due to an avalanche of overregulation much of which has questionable benefit. The only people who seem to be winning from this additional regulation are Wellington bureaucrats.

We have just seen the World’s eighth largest lender (HSBC) exit the NZ retail home loan market sighting regulation among one of their reasons for leaving. How long before other providers in the financial services industry decide to exit New Zealand disadvantaging consumers by reducing the level of competition in the market.

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ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
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BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
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Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
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Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
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Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
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Nelson Building Society 9.00 7.65 7.25 -
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Resimac - LVR < 80% 8.84 8.09 7.59 7.29
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Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.09 6.95
SBS Bank Special - 7.14 6.49 6.35
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Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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