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Climate-related disclosures update: multiple consultations and guidance documents released

Home Insights Climate-related disclosures update: multiple consultations and guidance documents released

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Contributed by: Emmeline Rushbrook, Polly Pope, Hannah Bain (RMV) and Mark Baker-Jones (Te Whakahaere)

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Published on: June 29, 2023


Last week saw a flurry of new guidance documents released and consultations launched in relation to the climate-related disclosures (CRD) regime of relevance to climate reporting entities (CREs).

The two guidance documents were the FMA's CRD monitoring plan 2023 - 2026 which sets out the FMA's plans for how it will monitor CREs' compliance with the CRD regime over the next five years, and a fact sheet which sets out the FMA's view of factors that CREs should consider before engaging a third-party provider to deliver services for the regime.

The consultation documents were as follows:




Consultation close date


Consultation: Exposure draft for the Financial Markets Conduct (Climate-related Disclosures) Amendment Regulations 2023 (relating to record-keeping and infringement fees)


Wednesday, 12 July 2023


Consultation: Proposed exemptions for CREs in liquidation, receivership, or voluntary administration


Thursday, 20 July 2023


Consultation: Proposed guidance and expectations for keeping proper climate-related records, with draft guidance


Friday, 4 August 2023

The release of these documents provides some much-needed direction for CREs that are already in their first reporting period under the CRD regime, even while some of the relevant regulations and guidance remain in draft. Key takeaways include:

  1. The release of the FMA's monitoring plan provides helpful clarity in relation to the approach that the FMA will take to monitoring the CRD regime. While the FMA plans to take an "educative" approach as the regime beds in, it will be proactively monitoring disclosures and has identified five key areas it will focus on in the first year.

  2. CREs should carefully consider the new consultations and guidance and consider whether any processes need updating to meet regulatory expectations.

  3. In relation to the consultations, CREs should also consider whether the proposals are workable and/or whether any changes or further guidance is required. In particular, the proposal for regulations relating to record-keeping to apply from the date that the regulations are made and CREs should consider whether this may cause difficulties in circumstances where the final form of the regulations is not yet clear but many CREs are already in their first reporting period.

  4. The FMA's factsheet in relation to third-party providers sets out a helpful framework for CREs to consider when enlisting consultants to support them with compliance with the CRD regime.

  5. The FMA's proposed exemption from the CRD regime for CREs in liquidation, receivership, or voluntary administration is a sensible step and aligns with the FMA's approach to financial reporting.

Should you wish to discuss any of the new materials, or require assistance in preparing a submission, please get in touch.

In addition, in relation to the appointment of third-party providers, the Russell McVeagh and Te Whakahaere team are here to help. Through our alliance, we can support your organisation to identify the specialist expertise required and provide you with tailored support, drawing on an international team of experts from a wide range of disciplines. Get in touch if you would like to hear more about how Russell McVeagh and Te Whakahaere can support your climate goals.

We provide further detail in relation to the guidance documents and consultations below.

FMA monitoring plan 2023 - 2026

While the FMA has signalled that it will take a "broadly educative and constructive" approach to enforcing compliance with the CRD regime in the early years, it has now provided further detail in its monitoring plan for 2023 – 2026. This includes detail as to certain "areas of focus" in the first year of reporting. These areas include whether CRDs have been filed on time and for the right entity, whether the substantive requirements of the CRDs regime have been met, whether CRDs are transparent and provide context, and whether CRDs are internally and externally consistent.

The monitoring plan highlights the importance of CREs taking the following steps:

  • engaging early with internal and external stakeholders and preparing a detailed planning timetable to ensure that CRDs can be produced to a high standard within the required timeframe;

  • taking legal advice where CRDs are required for organisations with complex organisational structures;

  • disclosing in their climate statements any of the disclosure requirements that the CRE has not been able to meet (the FMA will then consider this further to determine next steps, and may take regulatory action);

  • ensuring that disclosures relating to the quality and nature of underlying data are transparent, along with disclosures in relation to areas of complexity (including estimates, models, uncertainties or judgments); and

  • ensuring consistency of information both within the climate statements, and across the climate statements and public statements by the CRE.

In relation to the final point above, the FMA warns that if it notices any inconsistencies or contradictory messages that may be in breach of other laws or regulations, it will share this information with the applicable Government agency. In that regard, the monitoring plan is consistent with earlier indications from the FMA that greenwashing is a particular area of focus. Organisations should accordingly take particular care to ensure that any public statements are fair, not misleading and able to be substantiated.

In the second year of reporting, the FMA will integrate additional areas into their oversight of the CRD regime, assessing whether CREs have obtained independent assurance over their GHG emissions for reporting years beginning on or after 27 October 2024, improved on their first-year reporting based on any general and entity-specific feedback, and made reasonable efforts to comply with all additional disclosure requirements (to the extent that entities have previously relied on adoption provisions under the CRD regime. The FMA aims to settle into a "steady state" level of monitoring by the third year of reporting, continuing to review disclosures and underlying documents, and considering whether CREs have consistently improved their reporting over time.

The monitoring plan suggests that the FMA's general approach to interactions with CREs will be relatively informal, at least in the initial monitoring period. For example, the FMA is likely to use emails, verbal discussions and other non-statutory tools to communicate with CREs initially, rather than using statutory tools such as the commencement of investments and the issue of formal information requests under s 25 of the Financial Markets Authority Act 2011.

FMA factsheet: third party consultants

This information sheet sets out the FMA's view of factors that CREs should consider before engaging a third-party provider to deliver services for the CRD regime. For example, third parties engaged to provide expertise unavailable internally and/or to validate an organisation's internal work. While the factsheet is non-binding, it provides CREs with a helpful framework determining both whether third-party support is required, and the nature of that support.

Before engaging a third-party provider, the FMA suggests considering the following:

  • What is the purpose of engaging a third-party provider? CREs should have a basic understanding of both their obligations and the support required and match the provider to that need.

  • Does the third-party provider have the required skills, knowledge and experience, and will the third-party provider's services and outputs enable compliance with the CRD regime? Any third-party provider should understand the requirements of the CRD regime, provide outputs that meet those requirements, and describe any data sources, uncertainties, limitations, methodologies, and assumptions.

  • Has an appropriate due diligence process been followed? CREs should consider matters such as whether internal procurement policies and procedures have been followed, whether contracts and letters of engagement are fit for purpose, whether the provider can ensure they can meet relevant record-keeping obligations, and whether the auditor and assurance provider for CRDs is sufficiently independent.

Record-keeping: draft regulations and guidance

Draft regulations

Section 461V of the Financial Markets Conduct Act 2013 (FMCA) requires climate-reporting entities to keep records that will enable them to ensure compliance with the CRD regime. MBIE has now issued draft regulations for consultation in relation to this requirement.

In short, the draft regulations will require CREs to:

  • ensure that CRD records are readily identifiable and comprehensible (ie they enable an assessment of whether the record-keeping requirements have been met);

  • keep CRD records in English or te reo Māori (or another form provided they can be easily converted);

  • make CRD records available on written request by the FMA (or certain other interested parties) within the timeframe specified in the written request, or "as soon as practicable and in a reasonable manner" where the specified timeframe cannot reasonably be met; and

  • ensure that any third parties holding CRD records on behalf of a climate-reporting entity keep CRD records in such a way that the CRE can comply with its obligations.

The consultation paper suggests that these regulations will (as a general rule) apply from the date that the regulations are made and MBIE expects this to be by the end of September 2023. This means that climate-reporting entities should take steps now to ensure that their record-keeping processes comply with the draft regulations, and make any final tweaks once the regulations are finalised. Given CREs in their first reporting period are already required to comply with record-keeping obligations, we suggest that CREs carefully consider whether this timing is likely to be problematic and engage with the consultation on this point.

MBIE is also seeking feedback on whether it should introduce a regulation prescribing where CRD records are to be kept, noting that it would like to have ready access to all CRD records to ensure compliance with the regime.

FMA guidance

In addition to MBIE's consultation on the regulations themselves, the FMA is consulting on draft guidance in relation to the creating, keeping, and maintaining of climate-related records.

This guidance provides helpful insight into the FMA's expectations as to record-keeping and the way in which it is likely to consider records in the context of its monitoring of the CRD regime. It emphasises that record-keeping is an important aspect of substantiating an organisation's compliance with the CRD regime, and notes (amongst other things) the need for an effective system of controls in relation to climate records.

The guidance is detailed, and CREs should carefully design (or update) their record-keeping processes and controls to align with it. For example, the guidance includes a helpful appendix that sets out examples of the types of records that CREs could retain to substantiate each of the four key areas of disclosure.

Exemption for CREs in liquidation, receivership or voluntary administration

Finally, the FMA is proposing to exempt the following from the requirement to report under the CRD regime:

  • entities that are in liquidation, receivership or voluntary administration; and

  • managers that are CREs in respect of registered managed investment schemes in wind-up.

The exemption is proposed to be made under s 556 of the FMCA, which enables the FMA to issue a class exemption where the FMA is satisfied that it is necessary or desirable to promote one or more purposes of the FMCA.

In our view, the proposed exemption for entities and scheme managers as outlined above is a sensible step. Complying with the CRDs regime is a substantial exercise that insolvent CREs are unlikely to be in a position to complete, and the purposes of the CRD regime (which include, for example, ensuring a more efficient allocation of capital) are unlikely to be substantially advanced by requiring these entities and scheme managers to prepare disclosures. The FMA similarly supports exempting entities in liquidation, receivership or voluntary administration from the financial reporting and audit duties in the FMCA, and the proposed exemption for CRDs is consistent with that approach.

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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