Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill

on behalf of the Minister of Commerce and Consumer Affairs: I present a legislative statement on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill be now read a second time.

This bill forms a key part of our Government’s response to the climate emergency. I’d like to thank the Economic Development, Science and Innovation Committee for its consideration of the bill. I’d also like to acknowledge those who have made written and oral submissions, and I also want to thank the Hon Dr David Clark for his work on this bill. The committee considered 55 submission from industry groups and individuals, covering a range of matters. All submitters supported the policy intent of the bill. The committee has reported that key substantive decisions be retained, but have recommended some changes which will refine the policy intent of the bill. These changes will assist in bringing climate risks and resilience into the heart of financial and business decision-making.

Aotearoa New Zealand is the first country in the world to introduce legislation to require all large listed companies and large financial institutions to report on their climate-related risks in accordance with standards. This bill will make a significant contribution to the transition towards carbon neutrality by 2050. While we all have a part to play in reaching that goal, the financial sector is in a position to generate real and significant momentum towards that goal. This legislation ensures that financial organisations disclose and ultimately take action to mitigate climate-related risks, and take advantage of opportunities. It will do this by requiring the largest and most important businesses participating in New Zealand financial markets to disclose clear, comparable, and consistent information about the risks and opportunities presented by climate change. The current lack of reliable information about the impact of climate change on businesses is serious, because it can lead to the mispricing of assets, and the misallocation of capital. Investors, lenders, and insurance underwriters cannot make informed decisions if information about material risks is unavailable. The asset mispricing and capital misallocation risks also raise financial stability concerns, because markets can be vulnerable to abrupt corrections.

This bill has already caught the attention of Governments and people around the world because it provides accountability for the actions of large listed businesses and financial institutions in relation to climate change. This will help the sector to be a part of the solution rather than a part of the problem in the face of the climate change challenge. Trillions of dollars will need to be invested globally by 2050 to achieve the Paris Agreement goal of keeping the increase in global average temperatures to 1.5 degrees Celsius above pre-industrial levels. New Zealand businesses are well-placed to seize emissions-reducing opportunities in such areas as energy production, food production, and pollution reduction. The disclosure regime will contribute to this because it will provide a sound framework for identifying business opportunities. This bill helps investors to redirect capital to cleaner ways of doing business.

I’d like to turn to changes from select committee. There are three key issues included in the report, which balance the key areas of, first, not expanding the definition of climate reporting entities; second, allowing an exemption for growth markets and small listed issuers; and third, removing the disclose-or-explain provisions.

So, first, the definition of a climate reporting entity is unchanged in the bill. The committee received a significant number of submissions proposing that the definition of climate reporting entities should include public entities, and a range of private sector entities including large private companies.

The original scope of climate reporting entities has been retained, because focusing on the financial sector provides the most effective impact within the time frame needed to urgently respond to the climate emergency.

The financial sector influences every part of the economy. As banks, non-bank deposit takers, insurers, and scheme managers assess their own climate risks and opportunities, they can demand climate information as a condition of doing business or investing in business. The financial sector was chosen, as widening the scope of the disclosures would have caused a delay in introducing this bill. The Government will look at widening a scope after the legislation has been enacted.

And when it comes to public entities, they are covered by the reporting requirements of the Carbon Neutral Government Programme. Those reporting requirements will have some parallels to those in this bill, but, of course, public entities access capital differently from private companies, and so the parallels can only go so far.

When it comes to small listed issuers with a market capitalisation below $60 million, and entities listed on growth markets such as those of Catalist, they will be exempted from the mandatory climate disclosure regime. However, such entities may still choose to make climate-related disclosures. Catalist is a new public market licensed under the Financial Markets Conduct Act, and is targeted as a stepping-stone market for small issuers to access growth capital. Growth markets and small issuers will be exempted from the regime due to the risk that requiring all listed issuers to be climate-reporting entities will put up barriers to entry for such entities to access capital. We want entities to still be able to access capital, without disproportionate compliance cost barriers.

Small issuers contribute less than 1 percent of the total NZX market capitalisation. The NZX has 54 issuers, with a market capitalisation of less than $60 million, representing only 0.7 percent of the NZX’s total market capitalisation. The exemption of small issuers in growth markets still means that the majority of the financial sector are captured by the bill.

The bill originally provided a disclose-or-explain exception if a climate reporting entity reasonably determined that it is not materially affected by climate change. However, this still created a reporting requirement for such entities. The disclose-or-explain provisions have been removed from the bill, to remove a two-tier reporting system. All climate reporting entities will prepare climate statements using the same climate standards. Any need for differential reporting could be achieved through the application of climate standards. This ensures that users are able to compare reports and that all climate reporting entities are analysing their climate risks and opportunities.

To address the concerns of a few key stakeholders following the select committee process, the Hon David Clark will be tabling some amendments in a Supplementary Order Paper prior to the committee of the whole House stage of the bill.

Now, in closing, these refinements and changes the select committee have made have assisted the bill to achieve its aims of supporting intergenerational equity through informed investment decision-making. The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill will provide investors with the information that they need to make informed investment decisions. The bill will encourage disclosing entities to become more sustainable, by factoring the short-, medium-, and long-term effects of climate change into their business decisions.

Finally, I’d like to take this opportunity to, once again, thank the Hon David Clark, as well as the members of the Economic Development, Science and Innovation Committee, for their work in considering the bill, and all those who have participated in consultation during the development of this bill for their contributions. Now, on behalf of the Hon Dr David Clark, I am proud to commend this bill to the House.

ASSISTANT SPEAKER (Hon Jacqui Dean): The question is that the motion be agreed to.

Thank you very much, Madam Speaker. National is supporting this legislation, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill, at second reading but we will be seeking Supplementary Order Papers to clarify the effect and lessen cost but at the same time ensure that the legislation will meet its intent. However, therein lies the challenge, because the intent of the bill is not actually to directly have any effect upon a company and climate change, or that company’s part in climate change; it’s merely to have them report upon how climate change might affect their business in the future.

When I listened to the Minister James Shaw’s speech just a moment ago, I think he oversells the benefit and the likelihood that this bill will achieve the things the Government says they want to, albeit their intention is well meaning, because it’s not about the carbon footprint of a company or a business covered by the legislation; it’s how climate change might affect that business now or some time in the future.

The purpose of the bill is very clearly set out: “ensure that the effects of climate change are routinely considered in business, investment, lending, and insurance underwriting decisions”. Well, risk already is by these companies. These are large entities that are, more often, listed on stock exchanges in New Zealand, or can be overseas, and they already have significant obligations to report risk, to consider risk. In the case of this, therefore, when it comes to climate change, where it doesn’t move them directly, or actually indirectly, to do anything about their own activity when it comes to their carbon footprint, then it is well meaning but actually won’t make the changes that the Minister has just spoken about.

For instance, they need to prepare an annual climate statement that discloses information about the effects of climate change on their business or any fund they manage. Well, they get to say, “Here is the effect”, but they don’t actually have to do anything about it. Now, a debate as to whether they should is secondary, because, actually, they already report, they already consider these things, and I fear that the New Zealand public that believe that climate change is an important issue, and listening to the Minister’s speech, or, secondly, in considering what the Government has said this will achieve, will end up being disappointed, because I’m not sure it will achieve that.

Once they produce this report, they have to obtain independent assurance about the part of the climate change statement that relates to the disclosure of greenhouse gas emissions. So the Government is saying, “We need you; you’re a large entity that is on the stock exchange, that has absolute scrutiny as to your activities, that takes other people’s funds and lends them or invests them and must report through the stock exchange, through the media, to those shareholders or those investors, but actually we need you to go out and get this independently verified—this piece of work that you have done under this bill—to talk about what effect climate change might have on those investments some time in the future, at a cost, because we don’t trust you.”

There are two examples of this I want to make that I think don’t make a lot of sense. The first is a bank that lends predominantly in the housing sector, and perhaps they have portfolios that look to lend to build houses, beachfront sea resorts, or hotels for the tourism sector. Well, they’re going to have to go out and have an assessment done as to whether or not climate change will have an impact upon those assessments based on sea-level rise or, more than that, Government policy that makes it more expensive, more difficult to build at some point close to the sea, because of the Government’s view or a council’s decision as to whether or not, with sea-level rise, that is something that is acceptable—putting aside that, actually, the banks themselves already have to consider risk.

Well, they’ll come out and they’ll give the report that says, “Actually, we believe we have covered this risk off for our investors. There isn’t a great risk to us, except if the Government keeps changing the rules every time they come to Parliament, because they have a piece of legislation like this that is well intentioned and wants to suggest to the public that they are taking the issues seriously and actually doing something but they’re not. Costs will go up and, therefore, actually there could be a risk.” And so the Government already plays quite a significant role, when it comes to risk, that these businesses need to consider, but it not saying to them, if you find there is a risk, you must change your behaviour and not lend in that case to build the houses that we need, it’s saying you just need to report on it.

There is a second example here when it comes to the assurances around greenhouse gases, and it’s the agricultural sector, because, actually, banks in New Zealand lend to the agricultural sector across the board, including when it comes to animal farming—dairy. Well, the banks that are lending already have to factor in climate change requirements now and perhaps in the future when it comes to Government requirements on land. So a bank in New Zealand will have to go out and have an assessment done as to the risk of climate change to their investments—them lending to people in New Zealand to buy farms and to farm, to produce the food that we need to sell overseas for our economy. And it might come back and say, “Actually, we don’t believe there is a significant risk here, except when it comes to Government policy.” because if the Greens got their way and there were no more cows in New Zealand, actually, there would be a great risk to lending because of the uncertainty that creates. Now, that’s not the intention of this bill, because it doesn’t make them change, it makes the Green Party and the Government feel good, and perhaps some New Zealanders, but it isn’t having the effect that the Minister said that it would, other than reporting and cost and change. And I would say the Government has a very large role to play in this.

The National Party is very proud of its record when it comes to climate change and activity that is taken and things that actually will make a difference. We recognise that New Zealand must play its part on climate change issues in New Zealand and internationally. That’s why our climate change spokesman will Zoom into the other side of the world—he won’t get on a plane with nine or 10 other people and fly all the way over there to a climate change conference, as James Shaw as Minister will, with a lot of people at a time when, actually, most things in the world are being done by Zoom, and Mr Shaw and members opposite wanted Parliament to be done by Zoom, but he’ll jump on a plane and go off over there. The point of this is we think we need to play our part, and actions are louder than words. This piece of legislation is words, albeit well-meaning. James Shaw jumping on an airplane with 10 others and flying to the other side of the world, and then having to come back and take spaces that are desperately needed in MIQ is action, not words—action that actually probably makes climate change worse, not better.

We will be seeking change in three areas when we come to the committee of the whole House stage, and the Minister’s mentioned this. The first is around time frames. The time frames were changed in committee, and I hear from the Minister that the Minister responsible will bring forward Supplementary Order Papers (SOPs). It’s disappointing that, actually, through his MPs and the officials that wasn’t presented in the committee for us to consider them if they are that important. It’s almost as if he’s realised afterwards he’s made a mistake and wants to change it. But we think the time frame of the current legislation—it will enter into force within 12 months after Royal assent—is too soon because the standards that these businesses will need to report to are not set yet, and actually they are significant companies and large companies that take their responsibility seriously. They will want to meet this requirement. We think it should be longer and will bring forward an SOP to make that time frame longer—not so long they don’t have to report, even though it won’t make a change to climate change, but a reasonable period of time.

We also think that the public sector and the private sector should be treated the same. So what the Government has said is this will be an obligation on the private sector, but Crown entities actually will have to meet a different requirement based on a letter from a Minister. They are giving themselves an exemption and an opt-out and they shouldn’t. If it’s good enough for the private sector, it’s got to be good enough for the entities that the Government controls—the standards should be the same, because it sets a very, very bad precedent: “Do not what we do, just do as we say.”, and the private sector is sick of that.

The final one is the comply-or-explain approach. The comply-or-explain approach was taken out in committee, and the Minister mentioned that’s to level the playing field. Well, it actually doesn’t, because if there is a business that goes to an extent to find that climate change has no direct, meaningful impact upon their business, they should be able to say that. If it does have an impact upon their business and they don’t report it, they fall foul of the legislation, they have broken the law, and they will be held to account, but, again, what the Government is saying is “We don’t trust you, so we are going to make you go to the extent of reporting on something you have nothing to report on.” And I think that comply-or-explain is a better approach; it wouldn’t be used by many businesses, but it could be by some—it should be there. They are not allowed to break the law. They must still report if it has an impact upon them, but if it doesn’t, they shouldn’t have to go to the expense or the extent of meeting a requirement that doesn’t have an impact upon them and for them then to report, “We have nothing to show here”, they should be able to see it.

In those three areas, we will be tabling SOPs and hope the Government will work with us to make sure the legislation is not onerous upon these businesses but actually at least is around the intent of what the Government wants to do, which is send a signal, not actually have any impact upon climate change. The best way Mr Shaw can have an impact upon climate change is to Zoom to that conference over in Glasgow, not get on a plane with 10 other people.

Thank you, Madam Speaker. I appreciate the opportunity to take a call on this bill as the chair of the Economic Development, Science and Innovation Committee. As the Minister outlined in his opening speech—the Minister on behalf of the Minister—we had 55 submissions to this committee, and I’d also like, on behalf of the committee, to thank all of those submitters who spent an incredible amount of time on those submissions. They’re quite detailed submissions that we received, and a number presented oral submissions as well, so we’d like to thank them.

There were some common themes that came out. Overall, most of the submitters were supportive of the intent of the bill. They recognise the need for New Zealand to do our bit on climate change. We have signed up to the Paris Accord, and it is important that we do our bit. The reality is that this legislation is actually world-leading, and that was commented on by quite a few of the submitters around the aspect that no other country has legislation like this. So we’re the first country to bring this legislation into law. I expect other countries will be following suit when this passes.

There was another theme which was around widening the scope, and that came from quite a few submitters, and we heard in the first speech, in this debate on the second reading, from the Minister the reasons why the scope was retained. But I was pleased to hear and I’m sure the submitters will be pleased to hear from the Minister that there is an intention to look at widening the scope to include other entities, potentially including Government agencies and other businesses who are not associated with the financial markets. That will certainly be looked at at a later date, after this legislation is passed into law. So I think that’s something positive.

We heard from the previous speaker, the member from the National Party, Todd McClay, that businesses have to report but don’t have to actually do anything about it.

💬 Hon Michael Woodhouse: That is not what he said. That is not what he said, Mr Strange.

Well, he said that Ministers need to report but there is no enforcement for them to actually change their practices. That’s what he was saying and he did raise it during the committee a number of times, and, look, that is a fair point. But I believe that the market will force change from businesses. I believe that the market will force and, at the very least, encourage businesses to become more climate friendly. Investors are becoming more savvy. Investors are certainly very much switched on to climate-related aspects and they’re starting to look quite closely at the investment portfolios of businesses. They’re starting to look quite closely at the actions of businesses and how they affect climate change. I believe that investors, as the reporting increases, will make decisions on where they invest accordingly. So, yes, there is no regulation around businesses being forced to change their environmental practices but the market will, I believe, cause that to happen.

I’d just like to highlight a couple of submissions. One in particular which was quite interesting was from Business and Professional Women (BPW). They’re an international agency, and they highlighted the aspect that New Zealand will become the first country to introduce such legislation, and they hope that BPW International will support the introduction of this type of reporting globally, across other countries. So we’re already starting to see groups here in New Zealand who see this world-leading legislation come in, starting to talk to their groups in other countries, saying, “Start lobbying your Governments in order to bring some similar legislation.” They also highlighted the fact that climate change will affect women and girls disproportionately as they are more vulnerable to its effects, constituting the majority of the world’s poor and being more likely to rely on natural resources for their livelihood. They spoke very strongly in support of this legislation in terms of the aspect around climate change and the importance of climate change.

I’ll just touch on one final submission, which was the submission from 350 Aotearoa. In their submission they said that they recognise the climate change risk data in accounting is lacking, and that many industries and investors need more information to make prudent decisions. And that’s what this is about. This is about giving information to investors to inform their decisions, and I believe that those investment decisions will then cause businesses to become more environmentally friendly. The reality is that most businesses are doing a fairly good job in this area, but we can always do better, and the investors will make their decisions accordingly once the reporting increases.

I commend this bill to the House and look forward to hearing the rest of the debate.

Thank you, Madam Speaker. I want to firstly join with the chair of the Economic Development, Science and Innovation Committee in thanking the submitters on this bill, and the officials for the good work that they have done. As my colleague Mr McClay has pointed out, National will continue to support this, but with some caveats.

Now, I wasn’t on the committee that considered the bill, but I did speak on this bill in the first reading and I’m pleased to do so again in the second reading, having watched progress from the bleachers. I heard Mr Shaw, who was introducing the bill, make what I believe was a Nostradamus-like faux pas in leaving out the word “large” from his description of the list of companies that are going to be affected by that. It is true that at the moment, the requirements are going to be for all large listed companies, but he did show an indication and stated an indication that the Government’s intention would be, once the regime is in place, to widen the scope of the reporting requirements to a larger number of listed companies, then large private companies, and then probably small private companies, and then it becomes part of the international sort of financial reporting requirements that companies need to go through.

What was interesting was that he was very clear that public entities would be excluded from that on the basis that there are already expectations on them for similar reporting, and I want to remind the House of the comment I made in the first reading. MPs who have been here for a few years have heard successive reports from the Office of the Auditor-General about the relatively poor quality of the non-financial performance reporting of public entities, and it’s something that’s been a bit of an irritant to me that when we look at the audit reports and we hear from the auditors for annual review that we get the same kind of “should do better” reports that I’ve been hearing since about 2013.

It’s a source of frustration for the auditors, as well. They would like to be able to see improvements in the quality of non-financial information, and I’m not saying it’s easy. It is actually quite difficult, but it shouldn’t be as difficult as it has transpired. I think there needs to be a much more common taxonomy for statements of service performance and non-financial information from public entities more generally, and if that’s the track record of our public entities, I think it would behove the Government to consider a much higher standard for environmental reporting on them, rather than just leaving it to them to deal with.

This is a fascinating description, actually, of what we’re talking in respect of. I think what most people thought about when this bill came in was the impact of business on climate, but, actually, it’s very clear that this is about the impact of climate change on business, and that changes and makes much more complicated the regime for reporting.

I had expressed a hope at first reading that through the committee process we would get some sort of sense of what the reporting regime would look like, but not only did that not happen; we’ve actually kicked the can down the road a little bit by the extension of time for the requirements to come in, in order that the Financial Markets Authority and the External Reporting Board can actually devise those standards. I do have a bit of a problem with that on a couple of fronts. One is the provision of information comes at a cost. These are not costless reports. There’s quite an investment that needs to be made in them, and the cost of providing that information needs to be exceeded by the benefits to the users, and those users are going to be a number of stakeholders—banks, shareholders, regulators, customers, and so on—and we’re actually none the wiser. It’s only a minor irritant, but I do think we should have a bit better clarity about what the costs and benefits of these reporting regimes will be before we start to put them in.

I also want to just come back to this issue about sort of the impact that that kind of reverse thing of the impact of climate change on business and not the other way round, and also, as Mr McClay mentioned—and I want to elaborate on this—there’s actually not only the direct impact of climate change on business but the equally direct impact of Government responses to climate change through the regulatory process on business.

I want to use an example of that and try and, sort of, imagine how a reporting regime might, for example, cope with the oil and gas ban that has been imposed, or as it’s euphemistically known, by this Government in the previous Parliament, because regardless of the platitudes of the Minister of Energy and Resources about how much time we have to adjust and what little difference that’s going to make to organisations in the oil and gas industry, the province of Taranaki has a quite different view. The stakeholders have a different view. And a report on the impact of climate change on business is going to have some interesting things to say about the reality rather than the rhetoric of the impact of Government policies on business as they relate to climate change.

I think we can also use another example of, for example, the Overseas Investment Act changes enabling farm to forestry conversions, which is a direct climate change response but it could have negative impacts on large businesses who are not in that field, particularly, for example, Fonterra—it may have an impact on their ability to be able to source milkfat, for example. I mean, the impact of Government regulation on this is real. There are a plethora of examples I could use, and how that’s going to be folded into a reporting regime I think is going to be very, very important.

The last thing I would say about this is that most reporting requirements are ex post—what we call ex post. They are reports of what has happened in the past. The easiest ones to look at are financial reports because they are, firstly, a balance sheet, a snapshot of the statements of assets and liabilities of the company, as well as the statements of income and expenditure. So readers—banks and shareholders—can get a pretty good assessment of the past activity, compare it against the budgeted reports, and then look at, for example, if there’s a prospectus in capital raising, statements of projected financial performance, and so on. These are about predictions of the future, and that’s going to make these much more nebulous, potentially quite subjective. That’s where their value is going to be really, really interesting.

Now, I’m a strong supporter of this, and I talked about in my first reading the research from Professor David Lont at the University of Otago, where he had looked at greenhouse gas emissions reporting and the immediacy of the effect on the share price, not only of the organisations that reported on it but other organisations in the same industry that did not—had an effect on both of those groups of companies. But this is much more difficult to look at because we are looking at, sometimes, decades into the future of the impact of climate change on business, and the predictability and certainty of that will become less and less and less the further out we are looking. So, you know, we have the sense that climate change is certain, we don’t know the quantum or the timing of it, and so we’re going to have similar subjectivity and variability in these sorts of reports. So it’s going to be very difficult, I think, for the Financial Markets Authority to try and come up with a reporting framework that accommodates all of those variables.

I just want to finish by agreeing with Mr McClay on the need for an exemption framework and our opposition to the removal of that from the bill—and we will put it back in by an amendment at the committee of the whole House. The risk we run is that we have reporting for its own sake. I think entities should be able to make statements about the lack of any impact of climate change on them and leave it for the readers to determine whether or not that is accurate, and for regulators to decide whether that’s appropriate. But to force people into a reporting regime that they don’t believe applies to them I think is wrong. There are examples of this in New Zealand’s financial reporting standards, with differential reporting requirements for smaller companies or with different ownership models. So it’s not unusual to have variations from a default reporting position. So I think we need to think more carefully about whether or not that change should be made.

But with those caveats, and with a sense that it’s probably not going to set the world on fire—that’s not a pun on climate change—it is a move in the right direction, albeit slowly and subjectively.

Kia ora, Madam Speaker. Thank you for the opportunity to speak on this piece of legislation, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. I’m a member of the Economic Development, Science and Innovation Committee, so was a part of the select committee process and hearing the 55 submissions—again, as was spoken earlier about—all supporting the intent of this piece of legislation.

Now, just listening to our previous speaker, Michael Woodhouse, who’s just resumed his seat, I think this is a really timely piece of legislation and a piece of legislation that people are actually wanting. I did some research. I was looking around particularly in terms of people wanting to invest in companies, people wanting to actually invest, obviously, for their own families, for their own interests. And there was a US study back in 2019 that indicated that 85 percent of investors—85 percent of investors—expressed an interest in climate-related matters when it came to their investment portfolios, what they looked at.

Now, here in New Zealand, we have a high level of interest and most investors are still getting their climate information around companies they’re looking at through the news, at 49 percent; through companies’ websites, at 41 percent—rather than through a company’s annual report, which was around 36 percent, or if a company had a sustainability report that was only 32 percent. So we can see that local investors here in New Zealand are still getting their information through news sources and websites rather than actually through the companies that they’re looking at investing in.

Now, my colleague and chair of the select committee, Jamie Strange, commented—and then earlier we had the Hon Todd McClay, who’s also a member of our select committee, who was obviously talking around the fact this piece of legislation is around disclosure, but this piece of legislation wasn’t necessarily about any actions or companies having to do anything. Now, when I heard that comment, it got me thinking that back in—I think it was the early 1990s when the fair trade brand, the fair trade empire, came into existence, and suddenly it changed the way that people shopped. Suddenly it changed the way people purchased and went about their very lives, not because a company had to tell anyone what they were doing but because people then sought out, wanted to obviously support fair trade initiatives. So that’s become a global brand where people are making decisions because they are informed, and this piece of legislation is around informing people.

The other one, and for me personally, as a member of KiwiSaver, is that when I was for many years just passive on that service, to suddenly realise I can actually look at where my investments are going—so I was able to look at ethical investments. And again, I could have invested in whatever company I wanted, but I could then look and see, and I had opportunities. And again, with this piece of legislation, it allows people to look, to see, because it’s around the future, as the Hon James Shaw said. It’s around looking at the generations coming through. This is around intergenerational equity. And so having this piece of legislation in place, I think, is really important for the future of New Zealand.

I’m really proud, as a member of Parliament, that we’re the first country in the world to be initiating this. I look forward to the continuing conversation as we move on to our third reading and I commend this bill to the House.

Tēnā koe, Madam Speaker. I’m very pleased to take a call on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. I wasn’t on the Economic Development, Science and Innovation Committee, but, like others, really thank the submitters on it. Just looking through some of the submissions, there was a lot of support for this and also suggestions around making some changes, which the work of the select committee has picked up, in terms of a lot of the amendments that have been recommended.

The climate crisis is the biggest challenge facing us. All organisations and institutions have got a responsibility to reduce emissions. So this bill is really important, not just because it is world-leading but because of the transparency that it will provide with our large financial institutions, the big insurance companies, the large registered banks, the registered managers of investment schemes all being required to disclose and, ultimately, take action against climate-related risks.

So this bill is really consistent with Green Party policy. We like regulatory tools that encourage businesses to reduce their emissions, and this disclosure, and, as other speakers have noted, the transparency that it provides to markets, to potential investors, about what those risks are.

The National Party has talked quite a bit about the legislation being applied to the public sector, but I would remind members that the public sector legislation that was passed last year, the Public Service Act—has a new requirement in it on Government agencies to publish long-term insight briefings at least once every three years, about medium- and long-term risks, trends, and opportunities. They’re think pieces for the future.

It would be almost unthinkable that those briefings do not deal with a changing climate. So the public sector already has that responsibility, and there’s been an increasing amount of guidance being provided by the Department of the Prime Minister and Cabinet on how these long-term insight briefings are to be developed, the process for them, some of the criteria, and I really look forward in select committee to receiving those and considering them. So, this bill, in applying to some of our 200 biggest financial institutions—the large ones—is providing a similar requirement on the private sector.

The bill has got three main goals. It will, I think, really help ensure that the effects of climate change are routinely considered in business, investment, lending, and insurance underwriting decisions. It will help those entities demonstrate their responsibilities and their foresight in looking at how climate issues are considered in relation to their businesses, and it should lead to the better allocation of capital and help really smooth that transition to a sustainable, low-emissions economy. It should also make our financial system more resilient, which was what the national climate change risk assessment highlighted needed to be done.

So the 200 large businesses comprise more than 90 percent of New Zealand’s financial assets—it’s 200, so it is the major part of the financial market participants. As Minister Shaw mentioned, it is being looked at by actors overseas. Because our finance sector is so connected with other international markets and with players that have interests here and overseas, this bill is likely to impact on what those companies do overseas, as well. So we have got that major responsibility for doing something about climate change, and this bill is one of the steps towards that.

Just one other thing. One of the things that the National Party has commented on was the removal of the disclose-or-explain provision, which was recommended by our select committee. The removal of this exemption means that disclosures for all entities will be on a common basis. The disclose-or-explain provision would have potentially led to a two-tier differential system, and this recommendation of the select committee actually makes the bill simpler. So I commend the bill to the House and look forward to further readings.

Thank you, Madam Speaker. I rise on behalf of ACT to take a short call on this bill. The objective of this bill is to ensure that the effects of climate change are routinely considered in business, investment, lending, and insurance underwriting decisions. However, these effects are already routinely considered by business. We have sensible, incentive-based mechanisms in place, and, furthermore, successful businesses are those that are responsive to changing consumer demands. There is little doubt that the companies covered by this bill respond to those demands and publish information about their sustainability initiatives, including around climate change. Just look at any annual report over the last 10 years at the very least, and I don’t think we need to mandate greenwashing.

The people who work in these companies are everyday New Zealanders who deliver products and services to us, provide employment, and for the most part, work to make New Zealand a better place. The good news for the Government is that even if they don’t want to trust businesses, there is already a system in place to account for climate change: that is the emissions trading scheme (ETS). It puts a price on carbon under a national cap. This imposes costs, and businesses will respond by innovating and adjusting their operations. So we don’t believe this bill is needed. It also adds unnecessary reporting regulation, and frankly, the idea of forcing companies to better demonstrate responsibility is cynical because it assumes a lack of foresight. However, under the ETS, carbon prices are known to businesses. They can see longer-term price signals and respond and account for them.

If the Government really wants to look for entities that need better foresight, perhaps they should reflect on their woeful uptake of electric vehicles (EVs) in their fleets, or maybe they’ve just been waiting a little bit of time to give themselves a discount. Record coal imports and an increase in carbon emissions under their watch. At least businesses operate under a carbon cap.

This bill will have little to no impact on reducing emissions or meeting our international climate change commitments, but it will increase costs to businesses. We sometimes hear that convoluted tax bills are a tax lawyer’s best friend. Well, I think this bill is a marketer’s best friend, and with fines going up to $2.5 million, maybe the title of this bill should be changed to “Go Woke or Go Broke”. Thank you, Madam Speaker. We oppose this bill.

Tāmati Coffey: Madam Speaker?

Oh! I call Tāmati Coffey—just in time.

There’s a little process that needs to be gone through now, a little system, and I get that and I embrace it wholeheartedly. Thank you, Madam Speaker. I will take a short call on this. I don’t sit on the Economic Development, Science and Innovation Committee, but I understand the work that’s gone into this.

I want to, first of all, start by thanking, as we do, the many submitters who have come before the committee and put forward their thoughts. I also want to just acknowledge that this is a ground-breaking piece of legislation here. This is a first-in-the-world piece of legislation: the ability to be able to require financial institutions to be able to disclose the impacts of climate change on their business and explain how they’re going to manage that. The previous speakers said it; there are some businesses that are already doing that and I congratulate them.

I sit on a philanthropic trust. And actually one of the key measures that we talk about is how we’re going to respond to the impacts of climate change. There are businesses all around the country that are really taking this into consideration. This is becoming a common conversation around the water cooler these days, the effect of climate change, the protests that are happening out in the streets with our kids are striking because they think that this is important enough to actually take the issue out on to the streets and make sure that we, that all of us, from the business sector to us here in Parliament, to the education system, are actually recognising the impact that climate change is having on our environment and making sure that we respond to it.

We’ve declared a climate emergency and plenty of councils around the country have followed suit. So what this is is actually part of that journey. As we work to negate the effects of climate change, which is just the position that we’ve ended up with, then we have to acknowledge that actually there’s going to be many steps on that journey and this piece of legislation is just one of them.

Again, thank you to all of the submitters that put in their submission. We’ve traversed a couple of the tension points from previous speeches that were raised in committee and some of the ways that they’ve been dealt with. I won’t go back over that again—just to say that it’s nice to see that there is cross-party support for this with the big parties in the House. And I too commend this bill to the House.

This debate is interrupted and set down for resumption next sitting day. The House stands adjourned until 2.00 p.m. Tuesday, 28 September. Good afternoon.

Debate interrupted.

The House adjourned at 4.58 p.m.