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Climate-related disclosure framework: Get ready to report

Home Insights Climate-related disclosure framework: Get ready to report

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Contributed by: Sarah DeSourdy Hastings, Erin Gatenby and Nic Wilson

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Published on: April 07, 2022


A couple of weeks ago, the External Reporting Board (XRB) released the second consultation document on the proposed climate reporting standards that climate reporting entities (CREs) will need to report against under the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 (Act). The consultation document can be found here.

While the first consultation document focused on the Governance and Risk Management sections of Aotearoa New Zealand Climate Standard 1: Climate-related Disclosures (NZ CS 1) (see our previous update on that consultation here), the second consultation document focuses on the Strategy and Metrics and Targets sections of NZ CS 1. There are few surprises in the proposed Strategy and Metrics and Targets sections.

Updates are also provided on the:

  • assurance framework; 

  • first-time adoption provisions;

  • general requirements – including materiality; and

  • alignment of the climate-related disclosure framework with other frameworks. 

These areas of the second consultation document are likely to ultimately prove more interesting for CREs. We provide further details on the proposals below.

Next steps towards a climate-related disclosure regime

Submissions on the second consultation document are due by 13 April 2022.

The timing remains on track, with the exposure drafts of the climate standards set to be released in July 2022, and the final standards to be issued in December 2022. The XRB is also aiming to release guidance at similar times (and on an ongoing basis, as required).

This means that CREs in New Zealand are likely to need to comply with the climate-related disclosure regime for accounting periods starting in 2023, with the first reporting to occur in 2024. The assurance requirements will kick in from 27 October 2024 (including for accounting periods that are open on that date).

Contact the team

Get in touch with one of our experts listed at the bottom of this page if you would like to understand more about these developments or the climate-related disclosure regime.


The second consultation document provides an update on the proposed scope of the assurance engagement and the proposed level of assurance required. Under the Act, CREs must ensure that the mandatory GHG disclosures included in climate statements are the subject of assurance engagements.

The proposed scope will require assurance of the cross-industry gross scope 1, scope 2 and scope 3 emissions metric, the additional details in relation to the CRE's GHG emissions calculations, the preparation of a GHG emissions report (and provision of a link or reference to it in the CRE's climate statement) and the confirmation that the GHG disclosures in the CRE's climate statement have been drawn from its GHG emissions report.

The proposed minimum level of assurance is limited (or negative) assurance, but the XRB provides that this "should be revisited after a suitable period of time, once the assurance regime has commenced".

The Act also requires assurance providers to comply with accounting and assurance standards. The second consultation document provides that the XRB will engage separately on the assurance requirements that will apply to assurance practitioners over the course of 2022.

NZ CS 2: First-time Adoption of Aotearoa New Zealand Climate Standards

The second consultation document provides more colour on the first-time adoption provisions to be included in Aotearoa New Zealand Climate Standard 2: First-time Adoption of Aotearoa New Zealand Climate Standards (NZ CS 2).


The XRB acknowledges in the second consultation document that the Strategy section may be the most challenging to report against and provides that "In the early years we expect to see some CREs disclosing that they only have a limited understanding of the impacts and financial impacts of climate change".

The proposed first-time adoption provisions include:

  • initially disclosing progress towards developing transition and adaptation plans rather than the plans themselves;

  • initial relief from disclosing the time horizons of the financial impacts of climate-related risks and opportunities;

  • initially disclosing qualitative rather than qualitative and quantitative information on the actual and potential financial impacts of climate-related risks and opportunities.

Scenario analysis is excluded from this list, partly because it is a necessary first step to other requirements of NZ CS 1 and partly because its inclusion would further delay the implementation of the first-time adoption provisions that were ultimately proposed. The XRB provides in the second consultation document that "entities should aim to start scenario analysis now".

Metrics and Targets

While the first consultation document suggested that first-time adoption provisions may be proposed for the Metrics and Targets section, none are proposed in the second consultation document (other than for comparative information). The XRB acknowledges that the scope 3 emissions that are required to be disclosed in the Metrics and Targets section can be challenging to report, but provides that "as this is where many climate-related risks and opportunities lie, it is important that entities get underway with measuring and reporting these as soon as possible."

Governance and Risk Management

No first-time adoption provisions were proposed for the Governance and Risk Management sections in the first consultation document. The XRB provided in that document that "we consider that providing this information is not onerous, as the disclosures ask for a description of an entity’s current activities."

While the proposed first-time adoption provisions recognise that processes cannot be stood up overnight and understanding takes time, some CREs may be disappointed that more first-time adoption provisions have not been proposed. The XRB's statement in the second consultation document that "no-one is expecting perfection on day one" and the Financial Markets Authority's guidance published in November 2021 providing that its "initial regulatory stance will be focused on supporting CREs and encouraging development of good practice" may provide some comfort.[1] However, the second consultation document provides a clear expectation that the climate reporting "journey" should start now, and that disclosing information on a CRE's limited or progressing understanding in this area is in itself likely to be material to primary users.

NZ CS 3: General Requirements for Climate-related Disclosures

The second consultation document proposes an additional climate standard, Aotearoa New Zealand Climate Standard 3: General requirements for Climate-related Disclosures (NZ CS 3), that will include general requirements for climate statements. This replaces the authoritative notice, Aotearoa New Zealand Climate-related Disclosure Concepts, proposed in the first consultation document.

The proposed general requirements include various sections which, broadly, require the faithful representation of information and consistent and comparable reporting, and also a section on materiality. Materiality provisions were removed from the Act on the recommendation of the Select Committee, in contemplation that they would instead be included in the climate standards – see our previous update on the Select Committee recommendations here. The proposed materiality section is set out in full in the second consultation document.

The section provides that a CRE must disclose all material information about its climate-related risks and opportunities as required by the climate standards. In other words, all disclosures are subject to materiality judgements. The flip side of this is that, if the CRE determines that information is not material, it may not need to disclose it.

The section includes a proposed definition of material: information will be material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users make on the basis of their assessments of the CRE's enterprise value across all time horizons, including the long term. The XRB notes in the second consultation document that the definition may be amended to include "double materiality" or the inwards and outwards impacts of climate change (the material impact of climate change on the CRE and the material impact of the CRE on climate change) in the future.

The section also includes guidance for CREs when making materiality judgements, such as that material information is entity-specific, that materiality is based on the nature or magnitude, or both, of the items to which the information relates, and that quantitative and qualitative considerations should be involved.


The XRB continues to seek to align the climate-related disclosure framework under the Act with other domestic and international climate-related disclosure frameworks. This is helpful for CREs that are subject to more than one framework, but is also important for users – greater consistency between disclosures will make for more useful comparisons.

The other climate-related disclosure frameworks are not static. As an example of this, the XRB's approach in the first consultation document substantially aligned with the recommendations of the TCFD, but the approach in the second consultation document also borrows from prototype climate and general disclosure requirements that are being considered by the International Sustainability Standards Board (ISSB), which was not yet established when the XRB's first consultation document was released.

We expect the climate-related disclosure framework under the Act to be similarly dynamic. While the XRB's proposed climate reporting standards are generally principles-based rather than overly prescriptive, they are likely to be updated as other frameworks develop and reporting matures. CREs will need to ensure their processes and reporting keep up – implementation will not be a 'set and forget' compliance exercise.


This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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