The New Zealand government has announced revisions to its climate-related disclosure (CRD) regulation, aiming to alleviate compliance burdens on smaller companies and reduce liability risks for company directors. The changes include raising the reporting threshold significantly to exclude smaller entities from compliance requirements.
The CRD regime, introduced in 2021, mandated that banks, credit unions, insurers, and investment scheme managers with over NZD 1 billion (approximately USD 575 million) in assets, as well as issuers of listed equity or debt securities with a market capitalisation or debt face value exceeding NZD 60 million (USD 34.5 million), report annually on climate-related risks and opportunities. The first reporting period began in 2024, covering the 2023 fiscal year.
Commerce and Consumer Affairs Minister Scott Simpson noted the significant costs imposed by mandatory climate reporting, with some companies spending up to NZD 2 million on compliance. He highlighted that these costs and associated risks might deter company listings, pointing out that only 34 companies have listed on the NZX since 2020, whereas 37 have delisted.
The proposed amendments will increase the mandatory climate reporting threshold for listed issuers from NZD 60 million to NZD 1 billion and exclude managed investment schemes from the CRD. According to a government fact sheet, this update is expected to cut the number of reporting entities by approximately half.
Additionally, the amendments will remove personal liability for directors if their company breaches climate reporting rules. However, directors and companies will still be accountable for misleading or deceptive conduct or false statements. The government recognised that climate reporting involves forward-looking and uncertain information, contrasting with the historical data used in financial reporting, and thus will require a different evidence standard.
Legislation to implement these changes is anticipated to pass by 2026. Minister Simpson remarked that the climate reporting initiative, introduced by the previous government, positioned New Zealand as a global pioneer in this area. However, the rules have been seen as overly burdensome, deterring potential listings. The government has responded to feedback and is adjusting the regulations accordingly after the first reporting year.
