New Zealand is the first country to require banks to report on the effects of climate change. This is all part of their goal to be carbon neutral by 2050, and they feel that the financial industry plays a significant role.
Climate Change Minister James Shaw believes New Zealand’s move will pave the way for other countries to do the same. “New Zealand is a world-leader in this area and the first country in the world to introduce mandatory climate-related reporting for the financial sector.”
Shaw went on to say that “Climate-related disclosures will bring climate risks and resilience into the heart of financial and business decision making. It will encourage entities to become more sustainable by factoring the short, medium, and long-term effects of climate change into their business decisions.”
New Zealand’s new mandate will apply to insurers, banks, publicly listed companies, issuers, and investment managers – impacting around 200 of the most prominent financial market participants. Total assets are approximately $719 million.
Climate emissions have increased by 57% in New Zealand since 1990 – one of the largest increases of all industrialized countries. Because of this, New Zealand is doing everything it can to drive down emissions. They are even working to make their public sector carbon neutral by 2025.
As government entities work together, they can set regulations that will drive companies to reduce emissions.
Take the Paris Agreement, for example. Governments and companies are working to meet upcoming milestones, causing the carbon credit industry to boom this year alone. Since carbon credits can offset emissions, improve the environment, and spark economic growth, many view them as integral to fighting climate change.
Shaw said that Australia, Canada, the UK, France, Japan, and the EU are also working towards climate risk reporting for companies.
COP26 is set to start in just a few days. It will be interesting to see what other announcements will be made.