Climate change reporting rules cleared for takeoff

The new climate reporting standards, which will affect many fund managers, banks, insurers and NZX-listed companies next year, have gone through the consultation process largely intact, prohibiting fine-tuning of definitions and disclosures.

Most notably, the External Reporting Board (XRB) has removed the term “financial planning” and clarified some of the “scope 3” greenhouse gas disclosure rules, adding a Removed reference to “corporate value”.

According to the latest XRB information, the initial requirement to disclose the “financial planning process” was changed to “internal financial planning process” to “avoid conflict with the typical usage of the term” as understood by managed investment schemes (MIS). capital deployment and funding decision-making process”. manager.

Licensed MIS managers managing at least $1 billion in assets will have to comply with new climate disclosure rules for reporting periods beginning next January, although the rules have one year (or more) of certain obligations. includes an exemption for

The three XRB standards impose significant reporting and analysis obligations on approximately 200 entities, and implement practical compliance procedures incorporated under the Financial Sector (Climate-Related Disclosures and Other Matters) Amendment Act of 2021. I have decided.

XRB Chair Michele Embling said in a release:

It also urges boards and management to begin taking a closer look at climate-related risks and opportunities and what strategies and plans they have in place to manage them. “

However, many MIS managers question the appropriateness and/or necessity of issuing complex climate reports that span multiple fund documents.

For example, the Boutique Investment Group (BIG), a group of compliance professionals in the MIS industry, submitted a proposal calling for a simplified approach to climate reporting for accredited fund managers.

“The majority of our primary users are retail investors via Kiwisaver or direct investment schemes who need clear disclosures that are easy to understand without a thorough knowledge of climate,” the BIG filing said. says. “To this end, we believe that managed investment scheme disclosures should remain at a high level and link all information to the MIS manager’s strategy applicable to the scheme in question.”

In particular, BIG Consultation Feedback found that the requirement for “scenario analysis” (in which an entity must present the relevant risks and opportunities of some global temperature consequences) is still the “maximum practical It is a matter of great concern,” he said.

“Conducting scenario analysis for a large number of fixed income and equity instruments across many regions and sectors is a task beyond the resources and capabilities of most New Zealand MIS managers,” the BIG filing said.

“To provide qualitative data [certain] Disclosure requirements[s]…, the MIS Manager will be dependent on a third-party data provider. Data quality can be low and varies by provider. For example, data collected by surveys is generally outdated. The modeled data will be different for different providers within the same company due to different methodologies. Therefore, even when using a common scenario, the output from his MIS manager using different data providers is not comparable. “

The Financial Markets Authority is responsible for policing the climate reporting regime.