New Zealand Law Society - Preparing for climate-related financial disclosures

Preparing for climate-related financial disclosures

Preparing for climate-related financial disclosures

Last year Climate Change Minister James Shaw announced that New Zealand is aiming to become the first country in the world to make climate-related financial disclosures mandatory.

“To be first in the world to introduce mandatory reporting on the potential financial impact of climate change is a major milestone and a real challenge,” says Nicola Swann, Partner at Chapman Tripp.

“Having worked in the UK I know that many countries are gearing up to bring in reporting based on the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) which were made in 2017. The difference in Aotearoa is that we are the first, with the UK also now having announced its own regulation, to make this a legal requirement.”

The TCFD grew out of a meeting of G20 Finance Ministers and Central Bank Governors in 2015. It was established to help avoid major shocks to the global economy from unpriced climate related financial risk, and identify the information needed by investors, lenders and insurance underwriters to appropriately assess and price climate related risks and opportunities.

There are around 200 entities in New Zealand that will be required to produce climate-related financial disclosures. These include:

  • All registered banks, credit unions, and building societies with total assets of more than $1 billion.
  • All managers of registered investment schemes with greater than $1 billion in total assets under management.
  • All licensed insurers with greater than $1 billion in total assets under management or annual premium income greater than $250 million.
  • All equity and debt issuers listed on the NZX.
  • Crown financial institutions with greater than $1 billion in total assets under management.

Organisations will be expected to report against four thematic areas that represent core elements of how organisations operate


The Board’s oversight of climate-related risk and opportunities and management’s role in assessing and managing those risks and opportunities.


Identifying the climate related risks over the short, medium to long term and their impact on the organisation and its future plans.

Risk Management

Describing how the organisation will manage the identified climate-related risks, including from a regulatory perspective.

Metrics and Targets

Measuring how the organisation is tracking against the identified climate-related risks and opportunities.

The Government is seeking to introduce mandatory reporting from 2023 at the earliest. Some organisations are well ahead, already voluntarily publishing climate related disclosures. Others are just starting to understand what’s required of them, and some are yet to even begin considering the impact climate change will have on them, rather than their own impact on climate change via their GHG emissions, which has been the traditional way that businesses have engaged with climate change.

So, what can lawyers be doing to support organisations preparing for this new regulation?

Role of lawyers

Jason Woolley, General Counsel at Meridian Energy

Meridian Energy was one of the first organisations in Aotearoa to start reporting against the TCFD framework in 2019. General Counsel Jason Woolley and Head of Sustainability Tina Frew say their teams have worked closely together to support the organisation to make these disclosures.

“Our sustainability team has led the organisation on climate-related disclosures. Our role as in-house counsel is to work closely with them, look at the proposed disclosures and apply rigour to ensure that we are fulfilling what’s required and expected of us,” says Jason.

“As we have looked to grow and build out the detail of the climate-related disclosures we make each year we’ve found it’s been important to engage early with key people across the whole organisation to ensure we have done the work necessary to back up the disclosures we propose to make. This hopefully puts us in a good position to ensure we’re ready for when the regulations come into force.”

Tina Frew, Head of Sustainability at Meridian Energy

Over at Air New Zealand, Senior Legal Counsel, Sam Bailey, has had a similar experience as his organisation prepares for the regulations to come in.

“My team has been involved in looking at the TCFD framework to help the business understand what they have to do from a regulatory perspective.

“It’s been a really interesting exercise to switch how we’ve traditionally thought about climate change. Like most businesses, we’re used to considering the impact that our business is having on the climate but the TCFD framework flips that lens and is asking us to identify and prepare for the impacts that the climate will have on our business.”

Experienced climate risk lawyer Nicola Swan of Chapman Tripp sees the legal profession playing a key role in tackling climate change.

Nicola Swan, Climate risk lawyer at Chapman Tripp

“Lawyers have a responsibility to help their clients respond to the challenge of climate change. For example, thinking about climate change when drafting contracts, particularly those that contain supply or pricing commitments for many years to come.

“As a profession we need to upskill on climate change risk and regulation, as this is increasingly impacting all areas of the law.”

Main challenges with TCFD reporting

Both Meridian and Air New Zealand’s legal teams agree that the TCFD framework itself isn’t hugely complex, with the four pillars of reporting allowing quite a bit of flexibility for what to include. However, there are some challenges:


Scenario modelling is an important part of the work that needs to be done to quantify the impacts of climate change on your business.

“We use climate science and modelling to understand what’s coming down the track,” says Jason at Meridian.

“As a retailer and renewable electricity generator with a number of hydro stations and wind farms, understanding as much as we can about the weather is a core part of our business so we have some great people with highly skilled expertise in this area.”

For Air New Zealand, Sam admits it’s been more challenging.

“There are really two key challenges,” says Sam.

“The first is around educating businesses to identify climate-change related risks. Businesses are used to looking at risks in the short term but are not quite as good at projecting what will be happening in five to ten years’ time and beyond – which is when many of the impacts of climate change will begin to manifest. It’s a real shift in how you look at your risk horizon.

“The second challenge is around how you go about quantifying those risks. There is a significant amount of modelling of forward-looking data that is required to do this. Many businesses will need external help to do that, and I can see that this will be a significant challenge especially in the first few years of reporting against the TCFD framework.”

Nicola Swan agrees that finding in-house expertise in modelling will be challenging.

“The government is aware that many organisations will need help in undertaking physical risk scenario analysis to help them prepare their climate-related financial disclosures.

“We need to get better at forecasting business impact in ten – twenty years’ time.”

Getting cross-organisational buy-in

“One of the key things we’ve learned in preparing for reporting is that it requires a broad cross-functional group to provide input,” says Sam.

“Meaningful disclosures will rely on every business unit providing input to ensure you’ve considered all material risks. This kind of intense business analysis can be time consuming so be prepared.”

At a Board level, Chapman Tripp has been helping directors work through their responsibilities under the governance pillar.

“There is already a focus on directors to be aware of and to lead on managing climate related financial risk,” says Nicola.

“We’ve been working with the Aotearoa Circle to provide practical advice for directors to manage this risk as we’ve seen how important it will be for directors to upskill in this area.”

The biggest risk is not doing it

When Meridian came out in 2019 with their first round of reporting under the TCFD framework for Climate-related Financial Disclosures many were impressed they’d jumped on board so early. At that stage there was no guarantee this would become the norm for New Zealand, let alone a regulatory requirement. When asked if there was a risk in forging ahead Jason turns that question on its head.

“The bigger risk for us was probably not picking up the recommendations of the TCFD and giving the reporting a go. It can feel uncomfortable making disclosures based on forecast information that will almost inevitably change, but for us it would have been more uncomfortable not to adopt the TCFD framework and start using it. Sustainability is at the core of what makes Meridian who we are, so it made absolute sense to run with this.”

Following seven years in London Nicola can see the increasing global pressure being placed on organisations to play their part in the fight against climate change.

“Even without the TCFD framework being made mandatory, most organisations would want to be looking at how climate change will impact them. Organisations need to understand that climate risk is also financial and reputational – the best indicator of your future litigation risk from climate change is what your stakeholders are thinking about the issue and you want to be on the right side of this one.”

The opportunities TCFD reporting can bring

Head of Sustainability at Meridian, Tina Frew says the reaction to their first Climate-related Financial Disclosures has been positive.

“Investors have been pleased to see us taking a responsible approach and getting on board with TCFD before it becomes mandatory. More than ever organisations are looking at taking a sustainable approach, otherwise investors are turning away.”

Even just doing the work to prepare for reporting on climate risk disclosures has been beneficial for Air New Zealand.

“It’s been a really useful process to go through to look at what strategies we need to put in place to make us more resilient to the impacts of climate change” says Sam.

“Identifying and quantifying the risks climate change poses on us as a business will feed into what strategies we adopt over a medium and long term. For example, this work helps to support decisions around sustainable alternative fuels as well as fleet efficiency and looking at next generation aircraft.”

Advice for those preparing for climate related disclosures

“From an in-house perspective start early,” says Sam.

“It takes time to get where it needs to go. Make sure you have the right people in the room from the start – the decision makers are key. Learn lessons early so when mandatory reporting (and enforcement) comes in you’ve got a good set of reporting already to hand.

“For those coming in from the outside – be patient! In-house teams are pulled in every direction so provide strong guidance and be flexible.”

At Meridian, Tina says the best advice she has is not to do it alone.

“Talk to others and work out what will be best for you. Look at examples. Whilst the reporting still feels really new there are people who are well versed in this area and happy to share their knowledge and experience.”

Jason agrees that using your networks is important. He also says people need to recognise it will be hardest the first time round.

“The reporting will get easier year on year as people become more comfortable with the process. Our first year was really challenging – now we have a benchmark and figures to compare against having published two reports so far.”

From her experience, Nicola’s advice is also to start early.

“The more businesses can dedicate resource to thinking through the implications of climate change the better. The earlier you start planning the better prepared you will be and may potentially lessen any financial impact climate change will have on you.”

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