Add a bookmark to get started

Abstract view of canyon
16 October 20224 minute read

Climate-related disclosures: FMA's approach to monitoring record keeping

The Financial Markets Authority (FMA) has published its Initial monitoring approach for record keeping under the incoming climate-related disclosures (CRD) regime. Under the regime, a climate reporting entity (CRE) will be required to keep proper CRD records to enable the CRE to ensure that its climate statements comply with the CRD framework. CREs will also need to establish and maintain a satisfactory system of control of those records and retain them for at least seven years after the date the records are made.

The FMA is responsible for independent monitoring and enforcement of the CRD regime. The FMA has said that, consistent with its Implementation approach, it will take a "broadly educative and constructive approach" to CRD record keeping, initially focusing on serious misconduct. The FMA considers serious misconduct would include situations where CREs fail to create and retain records, or where those records are incorrect, insufficient or falsified. We discuss further below the FMA's expectations for what records should be kept. 

However, the FMA has higher expectations for reporting and record keeping processes that have been established for some time and cross over from financial reporting. For example, the FMA expects to see minutes from governance body meetings to verify some of the governance section disclosures.

You can find our previous updates on the incoming CRD regime here, here and here

Who is the monitoring approach for?

The monitoring approach is for all CREs which are required to keep CRD records. This includes:

  • listed issuers (other than excluded listed issuers);
  • registered banks;
  • licensed insurers;
  • credit unions;
  • building societies; and
  • managers of registered schemes (other than restricted schemes),

which are large

A listed issuer is "large" if:

  • it has quoted equity securities at any time in the accounting period and, as at the balance date of each of the two preceding accounting periods, has equity securities on issue (whether quoted or unquoted) that have a total value, as implied by the market price or fair value of those equity securities, that exceeds $60 million; or
  • at any time in the two preceding accounting periods, has quoted debt securities on issue with a total face value that exceeds $60 million.

A registered bank, licensed insurer, credit union or building society is "large" if, as at the balance date of each of the two preceding accounting periods, the total value of the assets of the entity and its subsidiaries (if any) exceeds $1 billion.

A "large" manager of a registered scheme (other than a restricted scheme) is a manager for which, as at the balance date of each of its two preceding accounting periods, the total value of assets of all schemes it manages (and all schemes for which it is an authorised body that provides the service of acting as a manager) exceeds $1 billion.

 

What records should CREs keep?

The FMA expects CREs to take reasonable efforts to identify, obtain, understand, report, collect and store appropriate disclosures and records with the information and expertise available. This should include sufficient documentation that provides objective evidence to support all information disclosed, such as material information underpinning exclusions, estimates, assumptions, limitations, modelling and scenario analysis. 

The FMA may ask to inspect:
  • calculation methodologies, data, and data sources;
  • documentation explaining the rationale, source and reasonableness of materiality, methodologies, estimations, uncertainties, assumptions, and exclusions;
  • meeting minutes;
  • documents outlining entity structure, policies, processes, strategy and contracts; and
  • greenhouse gas (GHG) inventory reports (to validate compliance with the disclosed GHG measurement and reporting standard).

What's next?

The FMA will issue more detailed record keeping guidance in mid-2023 after the regulations relating to CRD records have been finalised. Here is a timeline of upcoming events for the CRD regime:

  • December 2022 — External Reporting Board releases final Climate Standard.
  • January 2023 — First annual reporting periods for climate statements begin.
  • Early 2023 — Ministry of Business, Innovation and Employment publishes Exposure Draft of record keeping regulations.
  • June 2023 — FMA publishes detailed record keeping guidance.
  • April 2024 — First climate statements published.

If you have any questions about the CRD regime, please do not hesitate to contact us.

Print