Look for regulations to mandate both disclosures and the standards to use.

Mandatory climate-related disclosures in New Zealand are here

In December 2021, the New Zealand Government passed the legislation making climate-related disclosures mandatory for some organisations. The requirement will apply to large publicly listed companies, insurers, banks, non-bank deposit takers and investment managers. ?They will be expected to publish disclosures starting from the 2023 fiscal year. The reason for the [long-ish] delay is that they need to develop the standards against which to report. These standards will be developed by the External Reporting Board -- the national accounting and auditing assurance standards board, which every country has -- in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Of note is the fact that it took just a little over a year to go from announcing plans to mandate climate-related disclosures in September 2020, to introducing legislation in April 2021, and passing legislation in December 2021. It will be interesting to see if/when the New Zealand government moves to adopt the new global sustainability reporting standards developed by ISSB or EFRAG, and whether they will expand requirements beyond climate change.

Read the news??

UK FCA Policy Statement 21/23: Enhancing climate-related disclosures by standard listed companies?

The UK Financial Conduct Authority (FCA) has extended the application of its climate-related disclosure requirements (which already applied to premium listed issuers) to issuers of standard listed shares (and Global Depositary Receipts representing equity shares). The new rule will apply for fiscal years starting on or after 1 January 2022 -- so yes, now. Interestingly, the UK has adopted a progressive, comply-or-explain approach. It requires in-scope companies to include a statement in their annual financial report setting out: (i) whether they have made disclosures consistent with the TCFD’s recommendations and recommended disclosures in their annual financial report; (ii) if they don't, explain why, and describe steps they are taking or plan to take to be able to do to and in what timeframe; (iii) if they put the information elsewhere than their annual financial report, explain why; and (iv) indicate where their disclosures can be found. It's not prescribing what companies need to disclose or which standards they should use, which is why implementation is immediate. It does provide guidance, which reflects the latest TCFD guidance published last October. And it very interestingly encourages listed companies "to consider the Sustainability Accounting Standards Board (SASB) metrics for their sector when making their disclosures against the TCFD’s recommendations, as appropriate." The UK government has already announced its intention to make sustainability disclosures mandatory and compliant with the upcoming ISSB reporting standards.

Read PS 21/23

PS 21/24 Enhancing climate-related disclosures by asset managers, life insurers and FCA-regulated pension providers

The FCA also published its final policy to introduce TCFD-aligned disclosure requirements for asset managers, life insurers, and FCA-regulated pension providers. It requires in-scope firms to publish, in a prominent place on their website: (i) an annual TCFD entity report setting out how they take climate-related matters into account in managing or administering investments on behalf of clients and consumers; and (ii) disclosures on their products and portfolios, to be included or cross-referenced in appropriate client communications. As I often mention, not only is it good to know that investors are subject to the same requirements as companies, but also that disclosure obligations for investors drives them to require [more and more] information from the companies they invest in.

Read PS 21/24

EU Taxonomy: Commission begins expert consultations on Complementary Delegated Act covering certain nuclear and gas activities

The EU Commission has issued a draft text of a Taxonomy Complementary Delegated Act covering certain gas and nuclear activities, more specifically defining technical screening criteria for qualifying natural gas and nuclear energy as sustainable in the framework of the EU Taxonomy. Under the proposal, gas and nuclear power generation would be labelled green on the grounds that they are "transitional" activities - defined as those that are not fully sustainable, but which have emissions below industry average and do not lock in polluting assets. As one can imagine, this has caused quite a stir in Europe, not only for the timing of the release and the very short delay for the Platform on Sustainable Finance and the Member States Expert Group on Sustainable Finance to provide feedback, but also for the strongly divided opinions on whether these sources of energy can be considered green, even if they are classified "under clear and tight conditions". It will be interesting to follow how this unfolds, because Europe is so far ahead of any other jurisdiction in articulating it sustainability action plan. Also because the EU Taxonomy is intended as a tool to enable companies and investors to define what constitutes activities that have a substantial positive impact on the climate and the environment, in order allocate capital towards activities that help us achieve global sustainability goals, starting with climate change.

See the news

Convergence in Sustainable Business: The Imperative To Act

I had the opportunity to put pen to paper recently and share my thoughts on what sustainability is about and what we need to achieve it.

I believe there are three essential ingredients to achieve a mindset shift to sustainability: (i) a much wider lens through which to assess risks, including those previously thought too uncertain to predict or too unlikely to consider; (ii) a much longer-term assessment horizon, one that goes beyond our own lifespan and allows us to make the right decisions even when we are not the ones who will enjoy their benefits; and (iii) a much broader embracement of the collective “we” to include all human beings, those who are present today and those of the future.

To these essential ingredients I would add two necessary conditions. The maturity to accept that this is not someone else’s problem, it’s ours. And the courage to change, not just incrementally but radically, what we value and therefore what we measure and manage.

Read the speech

Thanks for tuning in. Be well.