The New Zealand Government has announced significant changes to limit the reach of the climate-related disclosures (CRD) regime today, as part of broader changes intended to reduce compliance burdens and strengthen New Zealand's capital markets.
The proposed changes follow on from a consultation that closed in February 2025 and make significant alterations to the scope of the CRD regime, including in respects that go beyond the initial proposals in the consultation.
The announcement will be a welcome relief for managers of managed investment schemes as well as the listed issuers who will now fall outside the scope of the regime as a result of adjustments to the reporting thresholds. Climate reporting entities (CREs) still subject to the regime (and their directors) will also benefit from lower liability settings.
Key changes
- Mandatory reporting threshold to be increased
The reporting threshold for listed issuers will increase substantially. The current NZ$60 million market capitalisation threshold will be lifted to NZ$1 billion for both equity and debt issuers. This is a significant departure from the consultation, which proposed an upper bound of NZ$550 million for the threshold increase. Issuers falling below the new threshold may, of course, still report voluntarily. - Liability settings to be softened
Under the current regime, directors are deemed liable for breaches of certain climate-related disclosure obligations by the CRE. Those liability settings will be amended. Directors will no longer be deemed liable solely by virtue of a CRE's breach of the climate reporting rules. - Evidence and substantiation
The Government announcement states that, as part of the amendments, directors and climate reporting entities will not have to show the same level of evidence for climate disclosures as they do for financial disclosures (noting that "climate reporting involves future-focused and uncertain information, unlike financial reporting, which draws on historical information"). - Managed investment schemes
At present, managers of managed investment schemes (MIS) with more than NZ$1 billion in total assets are required to prepare annual climate statements. Under the Government's proposed changes, MIS will no longer be subject to the CRD requirements. This is a notable shift from the consultation, which proposed raising the MIS threshold to NZ$5 billion as opposed to an outright exclusion from the climate-related disclosure regime.
Bell Gully comment
The proposed changes reflect a positive response to market feedback, including submissions made by Bell Gully. With New Zealand being the first mover on mandatory climate reporting, we believe it is correct to make modifications to the regime where appropriate.
We also advocated for change in relation to the absence of a "due diligence" defence for CREs, which has not been included in the proposed changes.
The Government's announcement confirms that liability for misleading or deceptive conduct, and for false or misleading statements under Part 2 of the Financial Markets Conduct Act, will remain in relation to the CRD regime (as will liability for unsubstantiated representations). However, there is currently no defence to such liability if the CRE took all reasonable steps to avoid the wrongdoing.
In a world where climate reporting entities are often under significant pressure, including from shareholders and climate activists, to set and publish ambitious targets (for example, carbon emissions reductions), the introduction of a "due diligence" defence for the entity would have been a positive enhancement to the regime. Targets are necessarily forward-looking, long-dated and based on ever-evolving, information.
We consider that it would be sensible for the regime to provide that, if a CRE takes all reasonable steps to ensure that climate statements are not false, misleading or unsubstantiated, then no liability should arise. In our view, the absence of such a defence creates an unreasonably strict regime, which may (counter-productively) hinder a CRE from being publicly ambitious about its sustainability journey and what it is reasonably capable of achieving.
Further potential reforms
For CREs that remain subject to the regime, various other potential reforms remain relevant. In particular, the XRB has recently consulted on potential extensions to the current adoption provisions (for disclosure of anticipated financial impacts, and disclosure/assurance of scope 3 emissions) as well as potential amendments to achieve closer alignment with climate reporting regimes overseas. Separately, the FMA is consulting on draft "Ethical Disclosure" Guidance (here) for the marketing of ESG financial products, with submissions due on 7 November 2025.
Policy process and timing
The Government has indicated these CRD changes will be progressed through the Financial Markets Conduct Amendment Bill, with passage expected in 2026.
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Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
