This last round of consultation is open for feedback until 26 September 2022. It is important for climate related reporting entities to read this exposure draft because it will be the last opportunity to provide feedback and it will help in preparation for complying with the climate-related disclosures regime.
In this update, we outline what reporting entities need to know about the three standards, the key changes from the first two consultation rounds, and important dates to keep in mind moving forward.
Climate-related disclosures regime
As set out in our previous update ‘climate reporting entities’ will be required to produce climate statements according to disclosure requirements in XRB standards.
What are the Aotearoa New Zealand Climate Standards?
- NZ CS 1: Climate-related Disclosures
- NZ CS 2: First-time Adoption of Aotearoa New Zealand Climate Standards
- NZ CS 3: General Requirements for Climate-related Disclosures
According to Dr Amelia Sharman, XRB’s director of sustainability reporting, the standards are designed as a package and it is important that they are read and interpreted together.
NZ CS 1 – Climate-related disclosures
This is the main disclosure standard, based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Notable changes from the first two rounds of consultation include:
- For scenario analysis, the XRB has increased the minimum number of climate-related scenarios from two to three.
- The upper bound scenario has also been increased from two to three degrees Celsius, to ensure more challenging physical risk scenarios are covered.
- The XRB has amended the disclosure on value chain stages covered to disclosure of whether any parts of the value chain are excluded in disclosures.
Metrics & Targets
- The requirement to prepare a separate greenhouse gas emissions report or inventory report has been removed. The requirement to produce a separate report from the primary climate-related financial disclosure statement was seen as being unduly onerous, as it would have resulted in primary users of the reports having to sort through unnecessary information.
NZ CS 2 – First-time Adoption of Aotearoa Climate Standards
NZ CS 2 provides a range of exceptions from some of the more onerous requirements of NZ CS 1 and NZ CS 3, in order to facilitate entities in preparing their first set of climate-related disclosures. For example, there is a one year exemption from disclosing an entity’s Scope 3 GHG emissions under the NZ CS 1 ‘Metrics and Targets’ standard.
NZ CS 3 – General requirements for climate-related disclosures
This section establishes the general requirements and principles for disclosure, based on an overarching principle of fair presentation. By following these principles and the disclosure objectives and requirements across all three standards, an entity’s climate-related disclosures is presumed to be a fair presentation of information. Additional disclosures may be required if compliance with the standards is insufficient to show a fair presentation.
To reflect the new changes in the report, the XRB have also published two draft guidance documents to provide contextual information and clarification on its interpretation of the guidance documents published by the TCFD and other bodies.
This is the final opportunity to provide feedback. This round of consultation is open until 26 September 2022. The final standards are expected to be released in December 2022.
The mandatory disclosure reporting regime is expected to apply for financial years ending on or after 31 December 2023, meaning that the first statements complying with the new regime will be issued in 2024.
If you have any questions about the matters raised in this article, or would like assistance with preparing a submission to the XRB, please get in touch with the contacts listed or your usual Bell Gully adviser.