The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko - has today published its Climate-Related Disclosures insights report from the first set of entities that were required to file climate statements.
The FMA reviewed 70 climate statements that were prepared by climate reporting entities (CREs) for reporting periods ended between December 2023 and March 2024.
The FMA's review looked at compliance with the disclosure requirements in the External Reporting Board's Aotearoa New Zealand Climate Standards and the legislative requirements under the Financial Markets Conduct Act 2013. The purpose of the report is to provide timely and useful feedback for climate reporting entities to improve disclosure in the future.
FMA Head of Audit, Financial Reporting and Climate Related Disclosures, Jacco Moison said: "We are pleased with the efforts that CREs have made to prepare and lodge their first set of mandatory climate statements under the CRD regime. Climate reporting entities have put in an enormous effort to ensure their first mandatory climate statements were prepared on time. We acknowledge that some have faced challenges, including obtaining reliable data, incurring higher-than expected costs and deciding how to make disclosures in the absence of guidance on certain topics."
Below is a sample of the key insights from the report. See the full report for more details.
Information disclosed
CREs need to strike the right balance on the amount of information disclosed. Disclosing too much may risk obscuring material information for primary users, while disclosing too little may result in material information being omitted.
The FMA found instances where climate statements included substantial detail about certain processes or included information that may not have been relevant or specific to the CRE itself. It also observed climate statements that may have omitted disclosures required by Climate Standards.
The FMA has recommended CREs carefully consider both their own facts and circumstances, as well as the nature and characteristics of their primary users, to ensure they only disclose material information in relation to each disclosure required by the Climate Standards.
Fairly present disclosures
The Climate Standards require that climate statements are presented fairly. The FMA found that some entities presented information that may have over emphasised positive news or impacts at the expense of a balanced representation. Some disclosed information that was difficult to understand or incomplete.
Explain the how
Disclosures across the governance, risk management and strategy thematic areas require CREs to explain how processes are undertaken. Others require disclosure of how these processes or matters are embedded across an organization. In some instances, the FMA observed entities simply disclosing that a process takes place or that it is connected to other part of their business without providing any explanation about what is involved in that process or the nature and extent of the connection.
Next steps
The FMA intends to continue its educative and constructive approach to the monitoring of climate statements. Two webinars will be held with the sector this month as well as further engagements in the new year to discuss the report's findings.
