Let us work to make climate-related disclosures mandatory

The New Zealand government is specifically targeting financial firms in this move. All banks with total assets of more than NZ$1 billion (R10.3 billion), insurers with more than NZ$1 billion in total assets under management, and all equity and debt issuers listed on the country's stock exchange will have to make these disclosures.

The reason is quite simple. The sustainability of these businesses, and in turn their own views on sustainability are crucial to its stakeholders. To quote the New Zealand Prime Minister: "This law will bring climate risks and resilience into the heart of financial and business decision-making."

Essentially then, financial institutions charged with the social and economic responsibility of holding, securing, protecting and investing funds on behalf of their customers will have to explain how they would and do manage climate-related risks and opportunities. Indirectly then, their disclosure of risk management will have to include this vital component or else they will no longer be able to be considered a public trust entity capable of securing its own future as well as that of its investors.

According to the Prime Minister, there is no other way that New Zealand can achieve its goal of achieving net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate.

It is proposed that these disclosures would be required by the affected companies from 2023.

This move resonates with the direction that the IFRS foundation is proposing to move in with its intended creation of a Sustainability Standards Board (SSB). The foundation has earmarked climate-related disclosure as one of the key and initial focus points. This move validates the IFRS foundation’s thought pattern.

What is admirable of what New Zealand is about to legislate is that it appears they have not got caught by semantics or details such as how the information would be assured, the consistency of the discourse or what framework would be used for the disclosure. They have asserted the principle, being that it will be compulsory for climate-related risks and strategy to be disclosed by qualifying financial entities.

They have not got bogged down by the how, the unintended consequences and various other scenarios. This, in the author’s view, has allowed for a bold and timely decision being capable of implementation sooner rather than later.

SAICA advocates that the rest of the word follows suit sooner rather than later and focus on the goal, and not get caught up in the politics and semantics. At the end of the day, it is a win-win situation for the investor community as well as the planet we call home.

The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.

Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that's why all of the top 100 Global Brands employ Chartered Accountants.

Kulani Chauke
Project Manager: Corporate Communications
SAICA Brand Division
011 479 0698/071 266 0019
***@saica.co.za