Countdown to New Zealand Climate Reporting

Date14th June 2022

In July, New Zealand’s External Reporting Board (XRB) will release the formal exposure draft of NZ Climate Standard 1 (NZ CS 1).

The standard will bring New Zealand to the forefront of climate reporting worldwide.

The standard will apply to ‘Climate Reporting Entities’ (CRE), being:

  • Large listed debt or equity issuers with a market capitalisation of over $60 million.

  • Large financial entities, such as banks, credit unions, managed investment schemes and insurers with assets of more than $1 billion, or insurers writing more than $250 million annual gross premium revenue.

Government estimates have 200 entities meeting this definition. Overseas incorporated entities will be required to make disclosures if their New Zealand business meets the CRE thresholds described above. Australian entities should note this development, as many CREs will have Australian head offices due to historically close relationships between standard setters in the two countries.

International developments – ISSB

XRB is watching international developments carefully and has expressed a desire to fall in line with international practice. Most important will be standards issued by the recently created International Sustainability Standards Board (ISSB), which was established by the IFRS Foundation at COP26.

On 31 March 2022, ISSB launched consultation on its first two proposed standards on general sustainability related disclosures and climate related disclosures, which it aims to issue by the end of 2022. The draft climate related disclosures have significant overlaps with the recommendations of the voluntary Task Force on Climate-related Financial Disclosures (TCFD) and other climate disclosure standards. Ultimately, the ISSB is expected to lead the development of climate and sustainability standards going forward.

What’s ahead in NZ CS 1?

NZ CS 1 will require CREs to produce an annual Climate Statement disclosing the impact of climate-related risks and opportunities on their financial position, financial performance and cash flows.

For quantitative reporting, XRB is proposing that entities use a range of climate-related scenarios including, at minimum, a 1.5°C transition scenario, and a greater than 2°C scenario.

In the Metrics and Targets section, CREs must prepare a Greenhouse Gas Emissions Report disclosing Scope 1, 2 and 3 emissions.

Challenges for banks and insurers

NZ CS 1 sets a high bar in a market where many New Zealand based insurers and banks do not yet have an address-level view of peril costs, and have not started on their Scope 3 emission calculations.

For example, an insurer would be required to consider how claims costs relating to flood, coastal erosion, and drought might change, and what the appropriate pricing response might be. Banks will do the same for credit risk and the value of their mortgage assets.

Scope 1 emissions arise from directly controlled sources, Scope 2 from purchased energy, and Scope 3 from activities not owned or controlled by the entity, but indirectly affected by its value chain[1].

The calculation of Scope 1 and Scope 2 emissions is well understood, but Scope 3 emissions are much more challenging for the following reasons:

  • It is difficult to gather data where management control does not exist.

  • It is not clear where the value chain ends, and it would appear influence extends beyond financial relationships – for example, use of private motor vehicles by employees in their commute to work.

  • Industry has not yet established standard calculation methods because the Scope 3 calculation is so vast, from paper consumed to vehicle bumpers repaired.

  • There is very real potential for double counting.

It would not be surprising if we see the Scope 3 calculation methodology evolve significantly over the coming years, possibly to a ‘carbon added’ style calculation.


Climate reporting commences for accounting periods beginning on or after 1 January 2023. Climate Statements will need to be filed no later than four months after the CRE’s balance date. Auditing commences for periods ending on or after 27 October 2024.

In the first year, qualitative information is required. Quantitative information and a transition plan are expected from the second climate statement onwards, and an adaptation plan is required from the third statement onwards.

Requirements for entities with a 31 March year end are shown in the graphic below.

What should insurers be doing today?

CREs will need to develop a roadmap to meet the reporting requirements, beginning with qualitative disclosures in 2024 and progressing to adaptation plans in 2026 This roadmap will need to assess the internal and external resources and capability required to deliver on NZ CS 1 over the next few years. At Finity, we have assisted and continue to assist our clients in developing high level impact assessments of climate change on their business and developing and implementing roadmaps for meeting disclosure requirements.

Achieving NZ CS1 is expected to require an investment in climate-related skills, which are currently a scarce resource. For example, to understand the physical impacts of climate change on insurance property claims, insurers will need to integrate climate scenarios into their models of perils. Banks would need to develop an understanding of how events such as floods, coastal erosion and storms would affect their customers today, and how climate change will change the frequency and severity of such events in the future.

There is also likely to be significant disruption to the NZ economy as it transitions towards net zero emissions, and insurers and banks will need to assess the risks and opportunities arising for their customers and for themselves.

Lastly, CREs will need to commence work now on assessing their own Scope 1 and 2 emissions, and to meet the NZ CS 1 Scope 3 timeframes. As noted above, Scope 3 will be challenging, and possibly need industry wide solutions, and so there is urgency in beginning this work.

What next?

As significant as it is, this is not the only climate related change coming to the New Zealand market! Our next climate blog will discuss New Zealand’s recently released Draft National Adaptation Plan, and the implications for CREs.

Get in touch

Finity has a team of climate and natural peril specialists who have been preparing for these changes over many years, and have been advising banks and insurers in Australia and NZ, contact us via the button below.


[1] Getting started on measuring your emissions » XRB

Get in touch

Contact our climate and natural peril specialists.