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

Members, when we last considered this bill, we were up to call No. 9, which is a split call.

Thank you, Mr Speaker. For people who may be listening at home or watching this on television, we are into the second reading of this Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill, and it’s a bill that seeks to ensure that organisations and entities that are subject to the Financial Markets Conduct Act will be required to broaden their financial reporting requirements so that they include climate-related disclosures.

Now, the Government speakers have made much of the fact that this is ground-breaking legislation. As far as we are told by Government members, there is no other jurisdiction that requires similar legislation of financial entities of this sort. It will affect about 200 financial entities, and so that will be something that will be new for them. It is something that many of them, we were told, are actually in some cases already doing.

So on this side of the House, we are supporting this legislation. I didn’t sit on the select committee—it went to the Economic Development, Science and Innovation Committee. Collectively, the committee received submissions—they had 55 submissions, in fact, that were presented to the committee, and the committee heard from 27 oral submitters.

So one of the things that I think is interesting about this is that it’s going to require these 200-odd entities to report climate-related matters that will have an impact on their business and the way they do business or the funds that they manage or the organisation and the entities over which they have control. They’ll be required to prepare an annual climate statement, and in that statement there will need to be a disclosure of information about the effects of climate change on their business of any funds they manage. There are several other matters as well that they will be required to report on, but I’ve got some reservations about this, notwithstanding the fact that this is a regulatory requirement, and it will impose some costs on the entities concerned.

But if we look at the situation in the United Kingdom, for instance, over there they implemented legislation very similar to our own zero carbon Act about a decade or more ago. And one of the things that we have learnt from that is that business and the commercial world actually got ahead of the legislators. Actually, in the UK, it is and has been the commercial world and business that have actually leapt ahead in terms of responding to the need to report on climate-related matters. Most businesses now have taken a lead from other businesses because their stakeholders, their shareholders, their customers, and the people that they supply are asking questions of that sort.

I can remember myself being in business many years ago when ISO requirements started to become mandatory. It was not so much the independent assessment of process and assessment of process and procedure and business methodologies that was being imposed by Government or the Parliament, as in this case, but it was our customer base, our suppliers, our stakeholders and shareholders who actually were driving the requirement for businesses to adopt a more transparent, open, and clear pathway to the way they ran their businesses, how they managed their businesses, and what have you. And, certainly, that’s been the case in climate issues in the United Kingdom.

So my concern is that here is a piece of legislation put in by regulation in the Parliament and one that the businesses will, I think, adopt. The principle and the processes are sound, but the methodology, I think, leaves something to be desired. I would have preferred that business be allowed to get on with it themselves and be able to get on with it in a way that saw them responding to their customer and supplier needs, rather than being forced to by the Government. So here we have something of a piece of legislation that is a bit akin to fiddling while Rome burns—while this country is importing record amounts of Indonesian coal to generate electricity and whilst our emissions are going up, we have a fiddly little piece of legislation that is good in principle but, actually, a very small part of what the Government needs to be doing in a climate emergency.

Thank you, Mr Speaker. Well, it’s a pleasure to take a call, somewhat unexpectedly. I thought I was in another turn after. But anyway, it’s fine. I’m quite happy to jump ahead and speak on this Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. I think the previous speaker, the Hon Scott Simpson, made some excellent points. In listening to the debate, particularly coming from the other side of the House, what has struck me is that the main point they’ve all sought to make is that this is going to gain attention all around the world. I just wonder if this bill’s main purpose is perhaps to cover for our lack of having a nationally determined contribution (NDC)—

💬 Hon Scott Simpson: Don’t tell Greta!

—to announce—that’s right. Well, yes, Greta probably won’t worry about it unless someone writes it in a speech for her! We don’t have an NDC to announce at Glasgow; it’s quite a smirch on our reputation, actually, albeit that our Prime Minister said this was a nuclear moment for her. Well, it is such a nuclear moment for her that she is not able to have an announcement at COP, wasn’t able to have an announcement last year, in fact, at a pre-meeting! So this is quite an embarrassing situation for them.

But anyway, we’ve got this legislation. We are supporting it, albeit that we will be introducing some Supplementary Order Papers (SOPs) to try and get it into a better shape than it actually is. But I take the Hon Scott Simpson’s point: is this actually going to achieve much, and, if it is, what are those things? It certainly will add some cost, and it will add cost to businesses who are, really, essentially, under this bill, reporting risks. These businesses that are captured by this, they are in the business of actually assessing risks—banks, for example, that’s their job. They don’t just lend money; they actually assess risks. Like insurance companies, they are not in the business of doing a public service, necessarily; they are in a business of assessing risk, laying off some of that risk for customers, and, in turn, laying off some of their risk with reinsurers. So they are all about assessing risks.

What is the real benefit in this? It doesn’t actually measure the footprint; it is actually assessing future risks. That is the point of it. It is going to be quite onerous, quite frankly. If you could imagine, let’s take sea level, for example. If a hotel chain decides to build a hotel on a beach, or a bank decides to fund a hotel that is going to be built somewhere near a beach, they are going to actually pay quite a lot of attention to sea-level projections. This bill is not going to make any difference at all to their concerns about whether they are going to build that hotel there or not. They will look at the known studies that are out there, what is happening in terms of sea level, what are the projections, how do those projections that are being made by those entities actually perform when you go back a few years—what were their projections, and now, at this point in time, have they come to pass or not? The projections on sea-level change, Mr Speaker—which I know you’ll be very interested in—have been much overblown.

Certainly in my electorate, we’ve got a 1 metre, at least, extra freeboard now because the land has gone up by over a metre and a half on most of the coast along the Kaikōura coast. I don’t know whether that would have to be captured in this assessment or not, but if it is—

💬 Hon Scott Simpson: What does the local member say?

Well, the local member says, “Well, if it is, what happens if we get seismically induced vertical land motion that goes the other way?” It could always go the other way. Although, historically, for the last 150 years, there’s been about three movements and they’ve all gone up, so maybe that is going to be a continuing trend.

So, I think, we go back to the ag sector—how is that going to affect the ag sector with the banks when they are lending money to the ag sector? I think they’ll be very engaged at the moment with the way the emissions trading scheme is performing. Given that Keith Woodford, who is a former professor from Lincoln University, has written a really interesting article. He says that we are on the cusp of the greatest land-use change in 100 years. Does that mean the banks therefore have to assess that as part of their risk in their lending in the agricultural sector? Will they, for example, not fund the expansion of a sheep and beef property, buying a neighbouring property for sheep and beef, but they will, perhaps, have a lower risk rating for someone who is buying the neighbouring property for carbon farming? These are quite serious and perverse effects that are potentially ahead for them, but they’re going to do that anyway, this bill is not going to make any difference.

What was also touched on by the Hon Scott Simpson: businesses care about what their customers think. They might not even think it themselves, but if the customer thinks something is a risk and they should care about it, then they are going to do their best to find out what the risks are, either don’t take that risk, or convince their customers that that risk is worth it—and not just their customers; their shareholders who are also answerable, particularly if they are a public company.

The whole Government programme—it doesn’t come into it, I suppose, but the Government has a carbon-neutral programme by 2025. Well, the Government has only just started measuring; haven’t even developed the model for the tool to measure all of their emissions. So this is such a climate emergency that nothing is happening, but we are bringing in some legislation which is groundbreaking, so that actually shows we’re doing something! But look, signalling virtue on these things is all very well but it doesn’t do anything about climate change. Actually, we’ve got to do tangible things, rather than coming up with some little piece of legislation, which may have a use—and we are supporting it, so we’re saying that it does have some use—but is not doing anything tangible for the climate. Rushing it in because you want something to announce and have the nuclear moment being endorsed by the Parliament in some way, for our illustrious leader, I think is quite perverse.

I also note the tool that the Government should have had developed to measure their emissions—not having that developed actually says something. I just wonder if we might see if we could put some SOP in that would capture the Government in that. It would be quite interesting to have them report on their performance and what risks they see, because certainly they are not living up to them at this stage.

We look at what has happened in the UK. As the Hon Scott Simpson said, at the moment they are going through a fuel crisis in the UK, not down to anything other than a shortage of heavy-truck drivers to circulate the fuel around the economy. They’ve also taken large steps, as we have, to try and get more renewable electricity into their sector, which is going to have a very interesting winter this year because they have made it very difficult for gas. They’ve got huge shale gas reserves, particularly in the Forest of Bowland, where they could actually have enough gas for 100 years, but they are not taking out of the ground, and instead they are relying on electricity from France. That connector the other day in Kent that failed almost caused a blackout. We are getting a similar issue here with Genesis having some issues with their hydro plant and we are burning record amounts of coal.

All this does is signal a bit of virtue. It doesn’t help us with our electricity supply. It doesn’t help us with the amount of coal that we are burning. It doesn’t help us lower our transport emissions. What is this all about? It is about signalling virtue. We do support this bill, but we are, I think, obliged to point out the weaknesses in the bill, point out that the motivation for bringing this bill to Parliament is not about climate change; it is about signalling virtue, it is about trying to have an announcement for the Prime Minister—or at least for the Minister of Climate Change to make the Prime Minister’s nuclear moment somehow a valid claim. It is not a nuclear moment; it is a pretty wet squib, quite frankly. With that I, with qualifications, commend it to the House.

Xiexie, Mr Speaker. Thank you for this opportunity to speak on this climate-related disclosures bill. As the Hon Scott Simpson has just said, this bill went to the Economic Development, Science and Innovation Committee. One of the members on that committee is Naisi Chen, she’s been unable to speak on this bill, so I asked her what she’d say about it, and I ask—before I say it—for the forgiveness of Chinese speakers, but she said, “ai diqiu”, which means “love the planet”. And why did she say this? Well, because this piece of legislation is one of the many tools that we need to respond to climate change, both mitigation and adaptation. Fiddling or not, we need to do many things, and I’m so pleased to hear members of the Opposition just now—particularly Stuart Smith—being so enthusiastic about the need to take tangible measures to fight climate change. I couldn’t agree with him any more than that.

I wanted to focus very briefly on the key hook or mechanism within this legislation, and that’s found at clause 28. It’s about the creation of climate standards. These are made by the external reporting board, the XRB, and then they’re reported on by the climate reporting entities. So at what would be new section 19A, there’s an ability for the board to make non-binding guidance that can facilitate best practice. But then at 19B—this is the really important one—it talks about the purpose of climate standards, and that is to, “provide for, or promote, climate-related disclosures, in order to”—and this is particularly important—at (a), “encourage entities to routinely consider the short-, medium-, and long-term risks and opportunities that climate change presents for the activities of the entity or the entity’s group”. It’s that that’s the key to this bill, identifying those risks and opportunities, reporting on them, and then, hopefully, that will lead to the action that we all want. Thank you, Mr Speaker, I commend this bill to the House.

Thank you, Mr Speaker. Lovely to have the opportunity to take a call on this. I am quite surprised, actually, that we’ve heard so much about the fact that we’re in a climate emergency right now and yet the Government members are not even standing to take their calls on this bill. This shows a Government that is not acting—[Multiple members interjection] Great to see that there’s some energy on the other side. I was a bit concerned about that because they were all asleep and missed the call before. So if they are prepared to take a few calls on this, well, fantastic. I would be happy to give Mr Faafoi the opportunity to stand up and give his contribution to it if he would wish to. But I suspect he won’t, because like most Government members, they actually are all about virtue signalling, and not delivering tangible outcomes that really matter for New Zealanders.

Now, this bill, there’s some aspects in it that are OK, but actually we are hearing about a climate emergency; “The end is nigh!” according to this Government. And yet, what are they proposing here? Minor tweaks. This Government-mandated reporting and disclosure is really just going to add additional compliance costs to businesses who are already ahead—well ahead of where this Government is at—leading the curve to ensure that they can maintain their competitive advantage in business and can secure opportunities in an adapting and evolving environment.

Now, businesses know that they have to adapt. They know that they must meet the changing requirements of climate change. Now, they’re doing that in an array of different manners and the flexibility to do that is an important part of how we should be functioning. And that’s what National believes: when there’s less Government it gives businesses the opportunity to drive their own success. Provide them with the platform and let them get on and do it rather than going in heavy-handed like this Government has on so many areas. We’re seeing it right now in the three waters stuff, which we’ve just been debating earlier tonight, as well. Another example of the Government stepping up, thinking they know best, coming down with a heavy fist, and ignoring all common sense.

Now, this bill, again, does something similar. So it’s about reducing the opportunity for people in their own businesses to make the right decisions for their particular industry or sector based on the needs at the time. We’re not seeing any real practical action being proposed here. These are just tweaks around the edges that are, as Mr Smith has said, about virtue signalling on what this Government may or may not look to do.

💬 Hon Member: What would the member do? Tell me what you’d do.

And we hear some chatter from the other side, but, again, they’re not prepared to take their calls and speeches on this because, clearly, it’s not as important as they might like to suggest with the press releases or public announcements. It’s easy to stand up and make an announcement, but the actual delivery is what we are seeing time and again from this Government, that they are not able to achieve. So quite sadly, really, New Zealanders are being let down by this Government.

This is going to result in additional compliance costs for businesses as well, being forced into something with the compulsory reporting, the disclosure requirements. There will be an additional cost to business, and businesses are seeing that time and again from this Government. Rather than making the playing field easier for them to operate, to navigate, to adapt, to pivot, whatever they may wish to do, the Government instead is coming down with a heavy-handed approach.

So this really is just a token gesture. Unfortunately, it’s reducing the opportunity for businesses to have the flexibility they need to succeed. That’s going to stymie our productivity at a time when we need businesses to be driving their own success more than ever, and that is before we even get on to some of the agricultural matters that Mr Smith mentioned as well. We have seen a significant shift in the playing field there, and this was the risk. When we stand up in this House and the Government puts forward legislation, it has a real life impact on those outside these walls, and sometimes I think that is forgotten. In the primary sector, we’ve seen that in particular, with the changes over recent years in terms of the emissions carbon offsetting, the forestry buying of sheep and beef land—there has been a significant shift in the market that has been absolutely a result of Government-imposed legislation. Now, that has a massive impact on those communities and those livelihoods, and it’s important that we recognise that. This legislation is another example of that, it is distorting the playing field and, unfortunately, it is making it more difficult rather than less difficult.

Now, I would really encourage the Government to get out there within their different industries—and I’m sure they have some connections, and, if they don’t, I’d be more than happy to help them in the ag sector and building and construction sector. Talk to anyone on this side of the House, we can give some connections to help you get some better insights into the implications of these sorts of legislative changes. Unfortunately, it is not going to help, it is virtue signalling and that is not what we need at this stage. So, on that basis, unfortunately this is another missed opportunity from the Government. It’s been all talk, no action, and New Zealanders are let down.

I call Tangi Utikere. Five minutes.

Ni hao, Mr Speaker, thank you—a pleasure to take a call on this second reading. Look, I think, having just listened to the previous speaker, Tim van de Molen, who has just resumed his seat—I think he’s actually got his wrong speech notes. We might need to remind him that he’s actually intending, as we’ve heard, his party to vote in support of this. If anyone’s sitting at home listening to that, they might be a little bit confused—but that’s turning out to perhaps be something that’s more familiar than not, this time, for some.

Look, I think this particular bill, what it does is it introduces a requirement for entities—and only, actually, those entities that are specifically identified and captured under the Financial Markets Conduct Act—to report in an additional way. The purpose around that is, quite simply, the inclusion of climate-related disclosures. We’ve heard a lot around that in the second reading of this bill this evening. But I think it’s also worth reminding members of the House that this is, yes, public-facing information. Then there is a level of accountability around that, and my colleague Rachel Brooking has touched on the avenue by which the reporting board would provide guidance. So entities are simply not left to their own devices around that.

But this is also an opportunity for entities to have an inward-facing opportunity to look at, actually, how they are performing as a business, and perhaps they may choose to take some particular decisions around climate-related activities that their entity is doing, to ensure that the longer-term focus is at play. I’m happy to commend this bill to the House.

The question is, That the amendments recommended by the Economic Development, Science and Innovation Committee by majority be agreed to.