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Summary
- NZ has become the first country to introduce a law that would need financial firms to explain the impact of climate change on their business.
- About 200 firms and many foreign firms that fulfil $1 billion limit of total assets will be under the legislation.
- NZ has a long way to go on tackling climate change.
NZ is now the world’s first country to pass a law on climate change, which would need banks, insurers, and investment managers to report the effects of climate change on their business.
All banks with total assets of more than $1 billion, insurers with total assets under management (AUM) of over $1 billion, and equity and debt issuers listed on the country's stock exchange, would be required to make disclosures.
On 13 April, Minister for climate change James Shaw stated that the new law was required as net-zero carbon emissions cannot be attained by 2050 until the financial sector recognises the impact of its investments on the climate.
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He added that the new law would need financial institutions to outline how they can handle climate-related challenges and opportunities. Climate risks and sustainability will be at the core of financial and industry decision-making under this law.
About 200 of New Zealand's largest businesses, as well as a number of multinational firms with a market capitalization of more than NZ$1 billion, will come under the law. If the bill is passed, businesses will have to make disclosures for the financial years starting next year, which means the first reports will be filed in 2023.
NZ still has a long road to go
NZ’s Greenhouse Gas Inventory, an official annual report of all anthropogenic emissions and removals of greenhouse gases in NZ, revealed that greenhouse gases (GHG) increased 2% between 2018 and 2019 to attain 82.3 million tonnes of carbon dioxide equivalent. This was because of climate-heating gases from construction, manufacturing, electricity, and heat production.
Methane accounts for more than a third of NZ’s GHG emissions. The Zero Carbon Act requires a 24-47% reduction in methane emissions by the year 2050. The Climate Change Commission has recommended that cutting livestock numbers, lowering petrol car imports, and planting more forestry, would reduce all emissions by about 30% in the next 16 years.
The NZ government has been taking several measures to tackle climate change. Last week, the NZ government banned new low- and medium-temperature coal-fired boilers and joined the private sector to help it transit away from fossil fuels.
