The Financial Markets Authority (FMA) has recently released draft guidance on climate-related reporting for New Zealand businesses. This guidance aims to help companies understand their obligations under the Financial Markets Conduct Act 2013 (FMCA) and provide clarity on how to report on climate-related risks and opportunities.
The FMA’s draft guidance is in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which was established by the Financial Stability Board in 2015. The TCFD’s recommendations provide a framework for companies to disclose information on climate-related risks and opportunities in their financial reporting.
The FMA’s draft guidance outlines the key areas that companies should consider when reporting on climate-related risks and opportunities. These include:
1. Governance: Companies should have clear governance structures in place to manage climate-related risks and opportunities. This includes having a board-level committee responsible for overseeing climate-related issues and ensuring that the company’s strategy is aligned with the Paris Agreement goals.
2. Strategy: Companies should have a clear strategy for managing climate-related risks and opportunities. This includes setting targets for reducing greenhouse gas emissions, assessing the impact of climate change on the company’s operations and supply chain, and identifying opportunities for innovation and growth in a low-carbon economy.
3. Risk management: Companies should have robust risk management processes in place to identify, assess, and manage climate-related risks. This includes conducting scenario analysis to assess the potential impact of different climate scenarios on the company’s financial performance.
4. Metrics and targets: Companies should report on key metrics and targets related to climate-related risks and opportunities. This includes reporting on greenhouse gas emissions, energy consumption, and renewable energy use, as well as setting targets for reducing emissions and increasing renewable energy use.
The FMA’s draft guidance is aimed at all companies that are subject to the FMCA, including listed companies, issuers of debt securities, and managed investment schemes. The guidance is also relevant to companies that are not subject to the FMCA but are considering voluntary reporting on climate-related risks and opportunities.
The FMA is seeking feedback on the draft guidance from stakeholders, including companies, investors, and other interested parties. The feedback period is open until 13 August 2021, and the FMA expects to release the final guidance later this year.
In conclusion, the FMA’s draft guidance on climate-related reporting provides a clear framework for companies to report on climate-related risks and opportunities. By following this guidance, companies can improve their transparency and accountability on climate-related issues, which is increasingly important for investors and other stakeholders. Companies should take this opportunity to provide feedback on the draft guidance and ensure that their reporting is aligned with best practice in this area.
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