On April 13th, David Clark—the Commerce and Consumer Affair Minister of New Zealand—announced that New Zealand will be the first country in the world to draft a legislation requiring financial sectors to divulge business effects on the environmental crisis. Officially, The Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill has received its first reading by the Parliament on April 15th, and is now in the stage where the Select Committee prepares a report outlining some recommendations for the Bill for the House. After two more readings, the bill will be passed and signed. Once successful, disclosures will be required for financial years beginning in 2022, and the first reports will be disclosed in 2023.  

As outlined on the New Zealand government website, the bill was introduced to reinforce New Zealand’s goal of achieving net-zero carbon emissions by 2050. Climate Change Minister James Shaw assured that “requiring the financial sector to disclose the impacts of climate change will help businesses identify the high-emitting activities that pose a risk to their future prosperity, as well as the opportunities presented by action on climate change and new low carbon technologies.” This means that the bill will require banks, insurers, and investment managers to reconsider the environmental implications of their decisions. 

The New Zealand Ministry of Business, Innovation and Employment website explains the purpose of mandatory reporting, stating that doing so not only ensures that businesses pay attention to the impact of climate change, but that the report will also help climate reporting entities make more informed decisions about the issue. Banks will be required to disclose information about how flooding and storms could affect real estate portfolios, for example, according to CNN. Moreover, they should report on how they can adjust their operations to be less carbon intensive. These requirements will encourage firms to assess not just their own investments, but also the environmental impact of lending to other parties. 

As the bill states, all registered banks with total assets of more than NZ$1 billion ($703 million USD), insurers with assets more than NZ$1 billion in management, including all equity and debt issuers on file with the country’s stock exchange will have to disclose effects of their activities. Reuters estimates that around 200 of the country’s largest banks, businesses, and foriegn firms meet the threshold and will be subject to legislation. Firms unable to report on climate change will need to explain their reasons. 

According to CNN, besides drafting this bill, the New Zealand government has attempted to reduce carbon footprint in many other ways, especially after it realized the threats of climate change and publicly announced they will achieve carbon neutrality by 2050. For instance, the government promised to only purchase zero-emissions public transport buses and other electric vehicles. Also—to reduce coal-burning emissions—the government will prohibit new installation of coal-fired boilers by the end of 2021. 

“There are technologies and activities that will cut emissions and become hugely valuable to the low carbon economy of the future,” Shaw said. “Becoming the first country in the world to introduce a law like this,” Clark follows, “means we have an opportunity to show real leadership and pave the way for other countries to make climate-related disclosures mandatory.”