Big business is being urged to get ready with mandatory climate-related reporting on the way for many large organisations.
The government plans to amend the Financial Markets Conduct Act to include standardised climate-related reporting, which would include transparent and consistent disclosures on governance, plans and progress on emission reductions, from January 2023.
Grant Thornton New Zealand partner David Pacey said climate change was a major risk to the stability of financial systems globally, which would affect a broad spectrum of organisations.
"For example, a business might experience supply chain disruptions due to adverse weather events, or consumers' buying behaviour might change as their preferences shift to more sustainable, environmentally friendly products and services," Pacey said, adding there was also the increasing cost of obtaining insurance for climate risks to be considered as well.
"New Zealand businesses currently provide little or no information about the implications of this risk, and where disclosures are actually made, the outputs and reports are often delivered inconsistently.
"This reduces transparency for investors and makes accurate reporting about the country's progress towards a zero-carbon future difficult."
He said greater transparency and standardised climate related financial disclosure was also expected to enable climate risk to be adequately priced in capital markets and help the government achieve its zero-carbon target by 2050.
Pacey said the amendment was likely to affect all regulated institutions, including registered banks, credit unions, and building societies with total assets of more than $1 billion.
It would would also affect managers of registered investment schemes and crown financial institutions with more than $1b of assets under management, licensed insurers with a billion of total assets under management and an annual premium income greater than $250 million, as well as companies listed on the NZX with a market market capitalisation of more than $60m.
While privately owned businesses and other organisations were currently exempt from the proposed disclosure requirements, Pacey said there would be compelling reasons for them to get on board.
"Private businesses reporting their impact on the environment against a robust framework will have a competitive edge and positive engagement with their brands," he said.
"Although impacted businesses can have their say about the proposed disclosure regime, the time to start preparing for the reporting process is now, as mandatory reporting will start in just over a year," Pacey said.