New Zealand Makes World’s 1st Climate Change Law For Financial Firms

New Zealand is about to become the world’s first country to bring a law into force that demands environmental accountability from financial firms by asking them to report on how their businesses affect climate change. The aim is to bring the financial sector on board with the efforts being made towards achieving the country’s target of becoming carbon neutral by 2050. 

The New Zealand government first revealed its plans to compel the financial sector to make disclosures in September last year, informing that those unable to disclose would have to give explanations. The bill has been introduced to the country’s parliament and will likely receive its first reading this week. Minister for Climate Change, James Shaw, said that banks, insurers, and investment managers will be required to report on the environmental impact of their operations, explaining how they will manage climate-related risks and opportunities. Further, the legislation will force firms to evaluate the impact of the companies they are lending money to, in addition to assessing the environmental cost of their own investment.

Regarding the same, the following entities will have to make disclosures for financial years beginning next year: all banks with total assets exceeding NZ$1billion; insurers with total assets under management being more than NZ$1billion; all equity and debt issuers listed on the country’s stock exchange. This implies that around 200 of the country’s biggest companies and several foreign firms that have assets of more than NZ$1billion, will come under the purview of this legislation. Once the bill is passed, the companies will have to start making their first reports 2023 onwards. “This law will bring climate risks and resilience into the heart of financial and business decision making,” Shaw said in a statement.

“While some businesses have started publishing reports about how climate change may affect their business, strategies and financial position, there is still a long way to go,” said Commerce and Consumer Affairs Minister David Clark. 

During its current term, the Jacinda Arden-led government has introduced many a policy to lower emissions and has promised to make the public sector carbon-neutral by 2025. Additionally, it hopes to buy only zero-emissions public transport buses by such time. The Prime Minister, who came back to power for a second time in last October through a landslide victory, has called climate change “nuclear free moment of our generation” in the past. 

Fighting climate change is high on New Zealand’s agenda and the government is taking novel initiatives to achieve the pre-set targets. “Becoming the first country in the world to introduce a law like this means we have an opportunity to show real leadership and pave the way for other countries to make climate-related disclosures mandatory,” said Clark.