Consultation on New Zealand climate-related disclosures timing challenge

FMA Consultation – Climate-related disclosures timing challenge

The Financial Markets Authority - Te Mana Tātai Hokohoko (FMA) is inviting feedback on a proposed class exemption for listed Climate Reporting Entities (CREs) to address the mismatch between reporting periods under the NZX Listing Rules and the Climate Related Disclosures (CRD) regime. Feedback is due by 5 pm, Monday 7 August 2023.

The timing issue for listed CREs

Under the regime, listed CREs¹ have four months to prepare and lodge their climate statements, but must publish a copy of those statements (or a link to them) in their annual report, which is required by the listing rules to be published three months after balance date.

This compresses the timeframe for listed CREs to publish their statements from four months to three months. Given CRD is new, this could be a challenge for listed CREs.

The proposed class exemption

The FMA acknowledges that during the first years of CRD, CREs may need the full four-month period to prepare their climate statements.

As a solution, the FMA proposes to exempt listed CREs from the requirement to include climate statements, or a link to climate statements, in their annual reports, if they instead include the following:

• a link or web address for a site where their climate statements will be accessible within four months of the entity's balance date; and
• an accompanying statement specifying the date on which those statements will be accessible via that link.

The exemption would run for two years only, as the relief it is intended to provide is transitional. The two-year term also recognises that CREs will also need to address the assurance requirements for greenhouse gas emissions disclosure from October 2024.

 

Registered banks

Large registered banks are also CREs, and have a similar timing mismatch, as they choose to combine their annual reports with their disclosure statements (due within three months of their balance date).

The FMA is not currently proposing to include registered banks in the scope of the exemption as some banks have indicated they can meet the compressed timeframe. However, the FMA is interested in feedback on whether the exemption should also cover registered bank CREs.

 

Our view

The first years of CRD will present a challenge for CREs as their understanding of the regime evolves and their compliance policies, procedures and processes are bedded in. The GHG assurance requirements coming on stream in October 2024 will exacerbate this challenge.

We consider:

• the proposed exemption is a sensible response to the otherwise compressed compliance timetable for listed issuers, given the varying circumstances of reporting entities;
• that there is merit in also exempting registered banks on the same terms. It is more efficient for both banks and the intended users of the reports to have banks' annual reports and disclosure statements combined in the same document. Without an exemption, unlisted banks that need more time to prepare their first climate statements may choose to publish their annual reports and disclosure statements separately.

 

Next steps

The FMA have sought feedback across a range of eleven questions. Feedback is due to due by 5pm on Monday 7 August 2023. If you have any questions about the consultation or would like any assistance preparing a submission, please get in touch with Daniel Street, Rachel Taylor, Tom Barnes, Rachel Brown or your usual DLA Piper contact.

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¹ CREs include "large listed issuers" – being NZX listed issuers with quoted equity or debt securities with over $60 million in market capitalisation or quoted debt.