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

I present a legislative statement on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill.

💬 SPEAKER: 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 third time.

We have a climate emergency, and today, with the passing of this legislation, New Zealand is on track to become the first country in the world to implement law requiring our financial sector to explain how it will manage risks and opportunities into the future. This is a landmark day. The financial sector will be required to supply clear, consistent, and comparable information, which will help with the efficient allocation of capital and markets, and over time we will see that this will have an impact on climate risk and opportunity. We will see investment patterns change for the betterment of our climate.

I want to begin today by thanking all of those in the financial markets industry who’ve worked alongside the Ministry of Business, Innovation and Employment (MBIE), and who’ve worked alongside the Ministry for the Environment, in the shaping of this legislation to make sure that it achieves its objectives.

I want to thank those who submitted to the Economic Development, Science and Innovation Committee, and who gave their time and expertise to make sure this law achieved its purposes. And, of course, I would be remiss not to mention the Hon James Shaw and his contribution, as he has championed this project from the start, so I do acknowledge James Shaw’s not insignificant contribution, in that respect. I also want to acknowledge one official, actually: Geoff Connor, from MBIE—him and his team. Geoff, now retired, has devoted a good deal of time and expertise to this project. I believe it kept him some time from his retirement, and I do want to place on record my thanks for his contributions.

I want to emphasise this is a big deal. This legislation will make a meaningful difference to New Zealand’s ambition to achieve carbon neutrality. One of the most significant risks that our economy faces is actually climate-related risks, and while businesses are at the point now where they acknowledge those risks, we have not seen consistent reporting on them, and we have not always seen good, clear information that would inform day-to-day decision-making, that would inform where investors put their capital now. It has tended to be viewed as a longer-term issue. Well, these risks and opportunities, if they’re not accounted for, cannot be accurately priced, investors cannot put their money where their risks are least, and, with it, we have a delay in climate action.

This bill aims to correct the current information gap, and it will do this by requiring around 200 of our largest financial market participants in New Zealand to disclose clear, consistent, comparable information about the risks and opportunities that their business carries so that we as investors, those who relate to financial markets, can make the choices that will shape our future.

There are four main elements to this bill. The first is it introduces a mandatory climate-related disclosures regime for most listed issuers along with large registered banks, licensed insurers, and managers of registered investment schemes.

The second thing it does is it requires these disclosures to be made in accordance with standards that will be issued by the External Reporting Board (XRB). Just yesterday, Minister Shaw and I launched the first consultation on these standards that will be issued by the XRB. They’ll be in line with the recommendations of the TCFD, the Task Force on Climate-related Financial Disclosures, whose work was published a number of years ago and is well known, and they, of course, responded to the Financial Stability Board’s request to provide those recommendations. They’re now considered international best practice and are being more and more widely adopted. At the start of this month, somebody worked out that TCFD recommendations are now supported across 89 countries and jurisdictions. There are over a thousand financial institutions responsible for assets of nearly $US200 trillion that have regard now to these standards.

The third main element of the bill is the Financial Market Authority’s responsibility for monitoring disclosures and enforcing compliance using its existing statutory powers, and the fourth key element is that the XRB will be able to issue guidance material on environmental, social, and governance—or ESG—reporting, and other aspects of non-financial reporting. That guidance will be incredibly important as we transition to this becoming standard practice for businesses. And I expect to see wider take-up beyond those 200 who will be mandated, as investors start to demand clearer reporting, more consistent reporting.

Countering climate change, of course, is a global priority, and this legislation is in tune with a number of international developments in the short to medium term. Other countries are on record stating their ambition to have mandatory disclosure regimes. The UK wants to have this in place by 2025. Australia, Canada, France, Japan, and the European Union are also working towards some form of climate risk reporting for companies. Globally, financial market regulators have increased their focus on climate risks too. The UK’s Financial Conduct Authority requires UK-listed commercial companies with a premium listing to disclose against the TCFD recommendations for accounting periods beginning at the start of this year. The Australian Securities and Investments Commission has highlighted climate-related risks as a systemic problem in the Australian market and recommended the same TCFD framework be used by listed companies.

We’re seeing this more broadly. In the run-up to COP26, the most consequential United Nations climate change conference in years, investors with $46 trillion in assets under management are urging Governments to adopt five key priorities. And it will surprise no one in this House now that they realise the importance of this legislation—that adopting standards in line with the TCFD recommendations is one of those priorities that those investors are recommending as a response to the climate crisis.

The Economic Development, Science and Innovation Committee made a number of important amendments, and they included excluding smaller listed issuers from the disclosure regime so that it would be a proportionate regime, removing the disclosure explain provisions to achieve clear and comparable records so that we didn’t have two duplicate systems running, so that we can compare them all. That means that all entities will be affected—well, we know all entities will be affected by climate change to some extent, so it will be reported proportionately to those entities. The Economic Development, Science and Innovation Committee amendments also remove the assurance practitioner licensing regime whilst maintaining the mandatory disclosure of greenhouse gas emissions so that a fit for purpose regime can be designed.

There was a Government Supplementary Order Paper (SOP) considered during the committee stage of the House, and I want to thank members for, I think, a high-quality debate. Some disagreed with aspects, but I think it was a good debate in this House, I have to say, and I look to members opposite speaking and I acknowledge their contributions. This SOP amended some provisions that had come back from the select committee, to make sure that they were tidy. The first change closed a loophole around the appropriate measure to assess the economic significance of debt issuers. Another change made it not an offence when an assurance practitioner’s report did not meet the applicable auditing and assurance standards. We want an industry of assurance practitioners to build up here who have the capability, and we don’t want to be overly punitive at the start of this regime. And, indeed, to that end, another change was achieved with that SOP that increased the time frame for assurance practitioners to send their qualified report to the regulators from seven to 20 days.

I am delighted that we have got to the third reading of this bill, that we will be the first country in the world to put ourselves on track to mandatory climate disclosure regime reporting, and that we will expect our companies to disclose their risks, their opportunities, around climate change—not just in the long term but for day-to-day investors to understand how they are shaping their businesses and how they are taking account of the growing risks to their businesses of being overly dependent on climate-unfriendly technologies or practices. This bill takes an important step to correct the ongoing and systematic overvaluation of emissions-intensive activities. It strikes the right balance between transparency for investors and consumers and proportionate costs on disclosing entities.

Today is a day that we in this House, I believe, can be proud of. We’ve provided better, clearer information to markets for efficient allocation of capital—not sexy words that roll off the tongue, but they do matter; they do matter. At a time, today, when we pass this bill, we will be voting not just for better information in markets; we’ll be voting for a better future for this planet. It will be a win for financial markets and it will be a win for the climate. I commend this bill to the House.

The question is that the motion be agreed to.

Listening to the Minister’s speech and I’m so excited by the legislation! We’ve done so much. New Zealand’s playing its part, we’ve fixed climate change—until we read the legislation and, actually, if the intent that comes from the speech was in the bill, we would be achieving much, much more than we are here today.

I remember when I was studying, when there was enthusiasm for a cause, when one showed leadership, when one actually got up and made the case, they would want to give a reward and it would often be a chocolate fish, and I was going to offer the Minister this chocolate fish that comes from the whips, a seat behind me, until I heard at the beginning of his speech, him say, “This is a landmark day for this Parliament.” I’ve decided to keep the chocolate fish and eat it myself in a moment. The reason for this is, actually, it doesn’t do anything in as far as the companies are concerned that are covered by the legislation in how they act when it comes to climate change. It doesn’t make them change the vehicles that they drive. It doesn’t mean they should fly less if the Government decides flying around the world or just within New Zealand is bad for climate change. It doesn’t do any of those things. It doesn’t encourage them to meet the Government’s commitment of the country being carbon neutral by a date in the future. What it does is gets them to spend a lot of time looking at the effects upon climate change upon their investments and whether or not that may have some impact upon them in the future or not. Doesn’t say if climate change does have an impact upon them that they have to or should change what they’re doing; merely that they should actually go out and have a look and assess these sorts of things.

In that respect, it’s not a harmful bill because, I suppose, the Government has a view that these companies have lots of spare time on their hands. But when the Minister says this is a landmark and that it shapes the future and all the other things that he said, actually, I’m not allowed to say that that’s misleading, but it’s certainly not giving the clearer picture of what this bill does.

We have spoken at each stage of this about our concerns—National is supporting it, but our concerns are about getting it right, about not overburdening enterprise unnecessarily. That does not say we don’t support this, nor that, actually, the entities that are covered by it shouldn’t go through a procedure to report. But the problem we have here is that procedure for how they will report is not available yet. The Minister said that yesterday he and James Shaw launched a consultation process. There’s a lot of achievement this week! A consultation process on what the reporting standards may be in the future. But, actually, as this has to happen within 12 months of entry into force, we made the case at other stages, and make it again, that, actually, for a number of these entities—which are very large businesses—the time frame with which they’ll have to report actually is likely to be too short. I hope the External Reporting Board will take that into account and do its work quickly because actually, yes, it’s important that they meet what the law will say that these enterprises, these companies, have to. We also want them to be doing what they need to, which is, actually, employing people, growing their businesses, helping the Government repay some of the debt that they’ve racked up over a period of time just as a result of COVID.

Regulation is not bad, but bad regulation is bad, and too much regulation does have an impact, it does have an effect. We also made the case all the way through that the public sector and the private sector should be the same. The Government has given a carve-out, an exemption, to its own entities and its own companies, and that actually sends the wrong signal. Now, Mr Shaw said in the committee stage, “Actually, they’re covered later on in a different way. We might do some more.” But the signal it sends to the private sector is: one rule for you, a different one for us when it comes to what the Government does. The Government says that, well, they can instruct these companies as to what they want them to do with their letters of expectation, but, actually, what it says in this document, in this law when it’s passed: if a company doesn’t meet the requirements of the law, they break the law. And the Government is really saying to the private sector: one rule for you, a different one for us, we know best. I think it sends the wrong signal.

The final area that we thought actually there needed to be a change—and we put in proposals for this, the House didn’t agree—was around the need for those who have no impact on them at all from climate change to still have to go through a lengthy period or process to be able to report that it has no impact upon them. We think, actually, they should have the ability just to explain if it is the case that climate change doesn’t have an impact upon their investments—not even their investments, on their business, then just explain the reason why and that would be enough, but they have to go through a process. It could be lengthy, it could be very, very expensive to say, “Nothing to see here.” In the case that a company did that, explained it doesn’t have an impact upon them and it does, they’ve broken the law. These are very large companies, many of them listed. Actually, they take their responsibilities seriously. We are burdening some that this legislation shouldn’t apply to, but that’s just very much the way of this Government, I suppose.

National supports reasonable law when it comes to New Zealand doing our part as far as climate change is concerned. It’s a shame that Minister Shaw is jumping on a plane with a lot of other people to fly to the other side of the world and this is all he really gets to wave at them—that New Zealand has passed a law very, very quickly that doesn’t actually make companies change what they do in as far as their own footprint is concerned, but all they’re going to do is report. In that respect, it’s a shame because the Government could have done much, much more here. We will be supporting it because it sends a signal, but merely sending a signal does not mean that this is a good day for this Parliament or that there’s a landmark deal. And I’m sorry, Minister, I’m having the chocolate fish.

Thank you, Mr Speaker. Well, it’s a shame actually that Todd McClay wasn’t on the consultation launch yesterday. There were just shy of 600 people. I was scrolling through the list of participants. It’s a pretty large group of people interested in where this thing is going and it is a shame that Todd McClay wasn’t on it, because then his speech would be better informed and less ignorant than what we just saw.

There are not a lot of good news days when it comes to climate change, but today is one of them. Today is a good news day in the domain of climate change and I want to start by thanking the Hon Dr David Clark, who has led this bill through the House, through to its completion. I am very grateful for the work that he has done as well as all of those people from the financial markets industry who have worked alongside officials from the Ministry of Business, Innovation and Employment as well as the Ministry for the Environment—grateful for all of their hard work to make sure that the legislation delivers on the objectives. I also wanted to thank all of those who submitted on the bill, and obviously the members of the Economic Development, Science and Innovation Committee, for all of their hard work.

There were a number of improvements that came out of that process, and I think it is again very good news when you can see how a bill is improved by the quality of submissions that are received both on paper and through that select committee process. So I do want to thank all of those people who actively engaged in it, because it is now a better bill than it was when we started and, as always in these processes, there are areas which were discovered during the process and remedies that were applied towards that, so that is good.

Despite the kind of fairly sweeping generalisations and inaccuracies in the National Party spokesperson’s speech just now, I do want to thank the National Party for their support for this bill. It does demonstrate that it is widely supported. It does reflect the fact that when the Government went out in the previous term to consult with the community, saying, “Should we be introducing a mandatory climate-related financial disclosures regime?”, 86 percent of private sector submitters were in favour of a mandatory regime. National, of course, purports to be the party of business, so it’s good to see that they’re not so out of touch with the business community that they weren’t able to reflect the enthusiasm with which the private sector has embraced this legislation.

The reason why—and it is unusual, of course, for business to say, yes, actually we would like a mandatory regime that we can all be a part of—is because actually it is now widely understood that climate change does represent a real material risk to business. But it is difficult on a voluntary basis for companies to report, because, in showing the risks that they are exposed to, if their competitor businesses don’t also do that then that company, no matter how good its intentions, is exposing itself in ways that its competitors are not. So the reason why mandatory reporting was so widely supported in the private sector was because people felt that it would introduce a level playing field and actually make it easier for them to report. And obviously the financial sector fund managers, analysts, directors and so on are also very interested in ensuring that this information comes to light, because of the very material risks.

Now, I would like to just start with the genesis of this legislation, just to remind the House where this has come from. As it happens, I was at the conference of the parties in Paris. I was in Opposition at the time. I was there as a guest of the then climate change Minister Tim Groser. He had started what is now a longstanding approach to bipartisan participation in the United Nations Framework Convention on Climate Change process. Of course, I have continued that in extending the invitations to the Opposition spokesperson to join us along on those, and unfortunately it’s been somewhat ungraciously declined this year, which I think is a signal of the kind of backward steps that the National Party are taking when it comes to climate change, desperately trying to get themselves out of the bipartisan consensus that their predecessors were involved in starting.

So I was over there as a guest of the then climate change Minister, the Hon Tim Groser, but of course because I was in Opposition I wasn’t involved directly in the negotiations. I went along to the launch of the Task Force on Climate-related Financial Disclosures, which was chaired by Michael Bloomberg and Mark Carney, who was then, of course, the Governor of the Bank of England. These two gentlemen are particularly dry, economically, You could not accuse either of them of being radical hippies in any sense, but the language that they were using really was sounding the alarm, and there was a key phrase that I think Mark Carney used. He said that in their assessment, in the assessment of that task force, there are literally of trillions of dollars of unquantified, undisclosed and therefore unmanaged risk sitting on corporate balance sheets as a result of climate change—trillions of dollars of risk that is not known about by the directors or the shareholders of those businesses, and of course that represents a material risk to those businesses themselves. It represents a material risk to the owners of those businesses. Actually, it’s so wide scale it also represents a risk to the financial system itself, which is why central banks like the Bank of England are so interested in supporting this climate-related financial disclosures regime and why our own central bank, the Reserve Bank, was so keen for us to adopt this legislation.

That risk falls into roughly two categories. The first is kind of physical risk, if you like: do I have assets that are on the coast that are exposed to sea-level rise or on flood plains; do I have agricultural businesses that will be exposed to risk from increasingly severe and frequent droughts or floods or storms or, in some cases, wild fires and so on. So the physical risks that are associated with climate change.

💬 Maureen Pugh: That’s rubbish—you know it.

And of course the second category of risk—coming from the West Coast! The second category of risk is related to what we call stranded asset risk, and that is, of course, that as the world transitions particularly away from fossil fuels or other high emissions intensive industries, my investments in those businesses may actually degrade over time.

Fossil fuels are, of course, the kind of most obvious example of this. We know scientifically that we cannot burn 80 percent of the known reserves of oil and gas and still be able to stay within 1.5 degrees of global warning. But, of course, the valuations of those companies on the stock exchange is based on the idea that you can extract and burn 100 percent of those reserves. So therefore that represents a very significant write-down risk for those companies, and you can see that starting to flow through. Particularly, I think it was BP not all that long ago had a huge write-down of some of their reserves on that basis. And so without being able to assess, to have a methodology for assessing these risks, directors, investors, fund managers, and analysts are in the dark about the scale of the risks that their investments are exposed to.

What that means is that they cannot price risk, they cannot allocate capital in a way that makes sense. Of course, you know, as the previous speaker mentioned, it doesn’t necessarily mean that they’re not going to continue investing in oil and gas or in other industries that are exposed to those risks, but they can at least price that risk according to the scale of the challenge that is in front of them. But, of course, the safest thing to do is to allocate your capital to low emissions businesses that are resilient to the effects of climate change.

And so what you will see as a result of this legislation and the standards that are being produced by the External Reporting Board is people starting to make decisions about where to put their money in ways that ensure that it is safe over the long term. Of course, what that will mean is that businesses will themselves start to make decisions about how to reduce their emissions profile, how to build up their adaptive capability and their resilience. That is about creating momentum in the economy away from the very high pollution economy that we’ve had in the past towards a low or even zero emission economy in the future.

So in that sense, it is a small intervention. You might think that corporate reporting by itself is, you know, particularly dry, isn’t necessarily going to make a difference, but my firm belief and the belief of many people around the world is that it’s going to make a significant difference. I commend it to the House.

Thank you, Mr Speaker. It’s a pleasure to be talking on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. I didn’t sit on the Economic Development, Science and Innovation Committee, but I know enough from just reading what’s going through on this bill to know that this bill really should be renamed. I think it should actually be named something along the lines of “Passing on best wishes to James Shaw as he takes off to Glasgow and wants to re-enter and experience the managed isolation and quarantine (MIQ) facilities in New Zealand as he returns—maybe on his own; maybe leaving the other 14 or so members overseas.” I think the process he’s going to have to endure in those MIQ spaces will be his reward. So when he gets to Glasgow—

💬 DEPUTY SPEAKER: I’m just going to remind the member that we’re debating the bill as agreed by the committee of the whole House. That is not part of this bill, so he should move to the bill.

So as I say, there’s no doubt that Mr Shaw is going to be able to talk about this bill when he’s in Glasgow. The issue with this bill is that we have no issue with an aspect of businesses moving towards meeting their climate change objectives and managing their investments well. The key issue is how that’s achieved, and making sure we do it in a practical manner and actually achieving the results we want to see in terms of businesses over time reducing their emissions and helping the country meet its climate change objectives. So there’s no issue with that.

The first thing I’d note about this bill is that, of course, it is a legislative solution to the issue. It’s not one that’s been led or allowed to be led by the industry. I know industry participants have been involved in the process. But in many cases, there are many industries that willingly would do this, but this is a legislative hard nut to achieve that outcome.

So yes, we support the bill, but we do have certain issues with it. I think a lot of that we covered yesterday in the discussion with the Minister. I’m very grateful for the Minister acknowledging the discussion yesterday in the committee of the whole House. At least we found out and got final clarification as to the threshold, after some time, namely that the $60 million threshold at which, if you’re a debt issuer or an equity issuer, if you breach that or you have a larger listed element of that, then you will be caught under this provision if your valuation at the date of your balance sheet means that you exceed the $60 million.

So one of the questions we raised yesterday, obviously, was what happens if during the course of the year you trigger the $60 million, but then come back under the $60 million at balance date. It was made clear, finally, by the Minister that it’s only at the balance date that the critical period is assessed.

The second one is the area of whether unlisted securities were included in the calculation of the $60 million and, again, finally, we got a result on that. It only relates to listed elements of debt and equity. Never got, actually, a clear definition of what equity is. Equity has many forms, and I think there was, perhaps, a view that equity is a bit too difficult to define, because you can have quasi - equity instruments, and I don’t know how this is catered for in the bill. That’s the first thing.

The second issue, I think, is the issue around standards, and the Minister pointed this out before, that the External Reporting Board will be the group tasked to actually determine the standards. Obviously, they’ll be working off the international task force that’s been set to set those standards. Of course, for industries or companies looking at how this might affect their reporting requirements, we now wait to see what the standards are that will be put in place. I would only urge that the standards that are ultimately agreed are prudent and appropriate and do not overreach, and certainly don’t go beyond what is actually recommended by the task force. We do have a tendency to take what happens overseas and then actually end up making it more difficult.

I think one of the greatest concerns is whilst we might start out with broad rules that will be helpful, over time what happens is they become increasingly more complex. You just need to look at the Resource Management Act from when it was passed 25 years ago and what it looks like today. I just hope that there’s a discipline around the standards that are actually agreed upon and implemented.

Then there’s the third issue around who are the assurance practitioners who are going to prepare these reports for the 200-odd entities that are going to be captured initially under this bill. It does come back to what the standards are, because the standards will dictate what are the skill sets of those people, how they’re going to do their work—there’s a short reporting period of that—and by what means will they be licensed. What requirements will they need to be licensed? I presume the Financial Markets Authority is going to do that. None of that, of course, has been set out yet. Of course, both those elements have got to be done over the next 12 months.

So there’s quite a lot of work for this to be put in place quickly in order for the companies, the reporting entities, to actually meet their requirements, which, of course, now under this bill will be required within 12 months. One of the Supplementary Order Papers that we debated yesterday was whether, in fact, they should be delayed, but the Government saw fit to refuse to delay it.

The other issue is this one about why only private businesses are captured by this bill, and the reliance on Crown entities and State-owned entities to be, basically, captured under these requirements through ministerial letters of expectation. Again, we just think that is a wrong approach. If it’s good for the private sector, it should be the same rules applied to Government sector organisations. In many cases they are even more well-resourced to do this type of thing. That lack of consistency is an issue for us.

The other final aspect I just want to talk about is the issue of the comply-or-explain approach. What this bill did—and it got taken out during the bill’s process through the committee—was the ability for companies to look at their arrangements and say, “Look, I don’t think we’re necessarily captured under these. We don’t have significant climate change issues in our businesses.” It might be a totally digital type of business that doesn’t have a large footprint, and the ability to be able to issue an explain notice would have been very helpful, and I think a pragmatic option for some businesses—not for all businesses—but it would have been a pragmatic approach. But that was removed during the select committee stage, which means that every single organisation must engage an assurance practitioner, go through the process, the costs involved in that, and the reporting of that.

Of course, this all means quite significant things for investors, because I think one of the issues that’s going to arise from this is that these larger entities may look to divest themselves of anything that potentially gives rise to risk. I think the issue that the Hon James Shaw was referring to, which was stranded assets—I think what we don’t want to see is businesses deciding not to invest, for instance, in better processes to use coal in steelmaking as a way to reduce emissions over time, as there’s a transition to other technologies. What we’ll see and could possibly see is there’s a general reluctance to look at anything that is perceived to have a significant climate change risk. I think if that leads to that outcome then that will be disappointing, because to migrate to new technologies takes time. I think if this bill cuts across that, then that’s a lost opportunity. But anyway, National is supporting this bill and we look forward to seeing how it’s put into place over time.

Kia ora, Mr Speaker. Thank you for the opportunity to speak on a wonderful day in this House where we can support the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill.

Now, it’s also an awesome day when you can see the Minister of Consumer and Commerce Affairs and the Minister of Climate Change come together to work on legislation for our future, work on legislation for the betterment of our environment and our climate. It’s been a pleasure to be part of the Economic Development, Science and Innovation Committee that has tracked with this legislation, has moved its way through.

I want to say a huge thankyou, this afternoon, to the Ministry of Business, Innovation and Employment for their hard work, as well as the Ministry for the Environment, but particularly—and I know that the Hon Minister David Clark said earlier that he wanted to thank the principal policy adviser Geoff Connor. Now, Geoff Connor was a champion of this piece of legislation. He walked us, guided us, pushed back, encouraged, and explained all those tiny and huge questions we had. Geoff is now retired, with this piece of legislation as part of his legacy and the work that he’s done. So thank you to Geoff Connor for the work that you did for us in this piece of legislation.

But I’m really grateful today that this legislation ensures that our financial organisations disclose and that they take action against climate-related risks and opportunities. Now, the Chartered Accountants Australia and New Zealand said, “New Zealand retail investors want climate clarity”—want climate clarity—and this piece of legislation gives that clarity. So, as a member of the select committee, I’m grateful to the work that we did, the work that this House did, the work that our Ministers have done, and I am glad that we’re the first country in the world to bring this into law, and on that, I commend this bill to the House.

Thank you, Mr Speaker. Again, I am delighted, as well as my colleague Glen Bennett, to stand and take a call on this bill. I wasn’t a member of the Economic Development, Science and Innovation Committee; however, I will say that I have had the pleasure of working with the Hon James Shaw on climate change legislation and I know how complex it gets. So I do acknowledge his expertise, as well as the Hon David Clark for the work that he has done on this bill, to bring it to the House and to get it through in what is, I guess, an extremely important area for us all.

When I read this legislation I thought about climate change and I thought about what I, as a person, could do to support the elimination of climate change or the changing so that we don’t get past that 1.5 degrees heating. And one of the things is, if I am lucky enough to have funding or lucky enough to have money to invest, I’d like to know where that money goes. I’d like to know that it’s ethical. I’d like to know that, perhaps, when I put that money into something that it isn’t going to disappear with stranded assets or, shall we say, go into something that I think is perhaps now no longer a useful investment, but also for me, perhaps, something that I’m not happy to invest in morally or ethically as well.

So what this bill does is it makes it really clear, makes it really transparent, that large banks, large insurers, large managers of managed investment schemes will disclose where they’re investing and what they’re investing in. So the information is going to be consistent, comparable, reliable, and clear. It’s going to tell us where that money’s going and it is going to be a great tool to change the way that we think about our money and we think about our investments. I commend it to the House.

Well, thank you, Mr Speaker, and sorry to spoil the party. I’ll just take a very short call on this, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. There have been a lot of regulations and mandatory regimes passed very recently in this House, and this one looks like an accountant that went and got a marketing degree!

The troubling thing—one of the troubling things—is the significant costs this could bring to business. And with that, obviously, mitigating emissions and looking after the environment, and reducing externalities for business, is the right thing to do and it’s important, and transparency on that is important, and consumers will demand it, but responsiveness does not require costly and highly prescriptive legislation like this. I don’t even know if this would be illegal under the Plain Language Bill, to be honest! So, look, this is, potentially, micromanaged greenwashing.

And the final thing I’ll add on this is that I’m afraid the National Party’s stance on this has just been totally confusing. They’ve given, in every reading of this bill, speeches in total opposition. I’m still waiting for them to actually say something positive about it other than the fact that they’re apparently supporting it. So, yeah, totally confusing! But, anyway, as I said, sorry to spoil the party, but we’re opposing it.

Thank you, Mr Speaker. Oh, what a day. It’s a good day to chuck my support in behind this bill, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. Can I say that this comes at a time when the nation is very concerned about climate change, about the impacts that it’s going to have—but, more than that, actually, plenty of businesses are, too. Lots of businesses are understanding that, actually, making sure that we are looking after the environment is everything; that, actually, consumers demand consideration of the effects of climate change and how businesses are going to be able to help in that. Businesses that have picked that up and run with it are actually seeing the benefits of that.

What this bill does is it responds to some of those concerns that we as a country, we as a globe, have when it comes to our climate. In fact, we’ve declared a climate emergency. What this bill is, initially, it is a first in the world. It is the kind of bill that is going to require the financial sector to disclose the impacts of climate change on their business but, more importantly, how they are going to do that.

As I said before, this isn’t something new. This is something that plenty of businesses have had to grapple with, as well. I thank all of those people that presented their submissions to the committee, that were carefully considered. This bill is still going to pass. This is a good thing. For that reason, I commend it to the House.

💬 DEPUTY SPEAKER: Members, this is a split call. I call the Hon Scott Simpson—five minutes.

Thank you, Mr Speaker. Listening to Government members, and particularly the Minister, one would have thought that this was epitome of the Prime Minister’s climate change emergency declaration and it was the most important step towards her generation’s nuclear-free moment. But once you scrape aside the excited rhetoric coming from Government MPs, and particularly the Minister and even the climate change Minister himself, what’s left is actually a small, worthy step forward in climate change legislation, but it’s not the great panacea that has been painted by speakers in this debate, either this third reading or earlier stages as this bill has progressed through the House.

So on this side of the House we are supporting it, but we are acknowledging that it is just a very, very small step, because it actually doesn’t change anything in terms of climate action. This is a Government that speaks a big game about climate action and delivers almost nothing. In fact, the Minister is on his way to Glasgow very shortly, and I’m sure he will be using this as an opportunity to say, “Look, New Zealand is doing its piece, it’s doing our bit, we’re doing what we should—what we said we would do.” Well, actually, if this is all he’s got to wave around, then it will be worthy of Greta Thunberg’s further—

💬 Stuart Smith: Admonishment?

Admonishment—yes, admonishment. I was going to say something that was probably unparliamentary, but “admonishment” is a good word, Stuart Smith. “Admonishment” is a good word.

So what this piece of legislation does is it actually is that small step forward to have 200—just 200—entities report in a consistent, regulated, measured way the risks relating to the investments that they have in terms of climate impacts. Now, that’s of itself, not a bad thing, but it’s a very small step in the right direction. But it is a part of an evolution in accounting practices, and it’s not too dissimilar to the changes in accounting practices that occurred in years gone by in terms of triple bottom line reporting, when businesses started taking into account environmental aspects in their business practices in the way that they reported to shareholders and stakeholders and indeed to customers. And it’s also not dissimilar in a way to the changes that occurred in the last few decades around accredited third-party standardisation of a range of factors in business—the International Organization for Standardization accreditation programme, and I can remember being involved in businesses that went through those programmes. It wasn’t so much because, initially, the business wanted to do; it was because our customers and stakeholders and shareholders wanted us to do it. An earlier speaker actually made mention of that. So that will be a prime driver.

What we have seen in other countries is that it’s actually often business that leads climate action. That’s certainly been the case in the United Kingdom, where they’ve had the equivalent of our zero-carbon legislation for more than a dozen years now. And any analysis of that legislation in the United Kingdom shows that actually it’s not parliamentarians passing pieces of legislation that actually goes to make change in the commercial and business world; it’s actually the business sector itself, being encouraged by their customers, by their stakeholders, and by their shareholders that will be leading the call for clear, consistent reporting of what they are doing as a business in terms of their climate action, or inaction, and what the risk or opportunities might be for them as a commercial entity.

So on this side of the House we are supporting this piece of legislation. We think that it is a small step in the right direction, but not the silver bullet that the Minister or the climate change Minister, James Shaw, would be wanting to make it out to be in terms of his trip to Glasgow and his attendance at COP26 in the very near future. So a small but worthy step in the right direction, nothing to be jumping all around and joining hands and singing “Kumbaya” about, but a step in the right direction none the less.

Tēnā koe, Mr Speaker. Happy to rise and take a call, in a sense in support of the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. I was not a member of the Economic Development, Science and Innovation Committee that considered this particular bill, but I do note that I have had an opportunity to speak on the first reading, second reading, and now third reading of the bill. What it does is seek to make some amendments to three pieces of legislation that currently exist. And, when I reflect right back to the genesis, in terms of that first reading contribution, the focus is around businesses being able to look and report some of those non-financial aspects that are so important, I’m sure, to them but also to us and the position that we have globally looking out as well.

As the Minister has said, this will assist us on our journey on getting to a net zero carbon emission target by 2050. And I guess, you know, we can hear the contributions from members opposite; the reality is that this a new business as usual. This is a new business as usual opportunity in that there is some good work that is being done. Already, there is good work being done in this space, in terms of our NGO sector, and the natural progression, of course, is in terms of our business sector and the opportunities that will be presented as a result of that as well.

It’s pleasing to see that, with the select committee process and then with the Supplementary Order Paper process as part of the committee of the whole House, this bill in its current form at third reading does provide an opportunity to, I guess, express in a positive way some of the changes that were considered as appropriate by the committee. I do think that the end result is a tidy bill that, I’m hopeful, will pass its third reading. On that basis, I’m happy to lend my support to it.

Thank you, Mr Speaker. It is a pleasure to speak on the third reading of the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill.

I do want to start out, though, by actually referencing Mr Shaw’s speech, where he alluded to National breaking the bipartisan approach to climate change, which is absolutely false. In fact, I wouldn’t have mentioned it otherwise, but it was at my instigation that the National Party actually got a look at the climate change report before it came out. It was never offered—so much for a bipartisan approach. I had to actually seek a meeting with James Shaw to get a look at that report before it went out, which I think was pretty poor form, actually. Well, you know, no surprises, I suppose.

But there’s been so much made of this by the Minister of Commerce and Consumer Affairs, who, I’d have to say, has in the last couple of days seemed to have found a new lease on life. Dr Clark—his enthusiasm to take up the full 10 minutes and almost filibuster on every bill he’s spoken on is in stark contrast to the other members on that side of the House, who, if they make two minutes, it is actually quite a record. But, anyway, we’ll give him marks for enthusiasm—that’s great.

This bill is important, but the importance has been over-exaggerated quite significantly by quite some margin. I think Scott Simpson said it was a small step. I would describe it as one small step for New Zealand, but a giant leap in terms of PR and spin. It will have limited effect, if any, on climate change. This is actually all about having something for James Shaw and the New Zealand Government to announce at Glasgow, rather than anything that will make a material difference along the way.

There were some significant issues for this bill that we could have tidied up. But, unfortunately, the Government members didn’t support those, and I think the Hon Todd McClay made a very good point about those businesses that don’t actually have an exposure to climate change or any effect in their business, by either their ownership of property that might be exposed to sea-level rise or flood risk, or their investments and other matters that qualify under the bill. But by virtue of their size, they have to report. By virtue of that requirement, they may have to do some needless reporting. We don’t know what the reporting is, because we have to wait and see what the External Reporting Board is going to come up with. What is going to be the requirement, we don’t know.

So we pointed out a few of those issues in the committee of the whole House yesterday, but, instead, we’re rushing this through. Quite clearly, perhaps, Mr Shaw is off to the airport at the moment, with his other 19 or so comrades that are off to Glasgow.

But the reporting standard procedures are important and we should have known about those. I think that businesses will move in this space as fast as their customers demand, as fast as their competitors move—or perhaps a little faster if they see an advantage in it—and as fast as their investors will demand. All those forces are already in play, and businesses, if they are successful in any way—and all these businesses are, or most of them, anyway—are very aware of that every day. A lot of these businesses are financial institutions and insurance companies, and all of those entities are in the business of measuring and assessing risk every day.

This is just another risk. It’s a very important risk, but it is a risk, and to actually package this as a giant step forward in the battle against climate change, I think, is a huge exaggeration. It doesn’t serve any other purpose other than to give the Minister and the New Zealand Government something to trumpet at COP26 in a couple of weeks, when we really should have been doing stuff. They declared a climate emergency and have done anything but act with urgency in this space, and New Zealand’s emissions, which were tracking down under National, have gone up significantly ever since they took over as Government in 2017.

So with that, it’s a qualified commendation towards the House. Thank you.

Thank you, Mr Speaker. I’m delighted to be the final speaker on this third reading of the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. Like some of the speakers before me, I’ve spoken on all three readings of this bill.

I recall, in my first speech, expressing some sadness that the bill wasn’t being referred to the Environment Committee. The previous speaker, Stuart Smith, said in reply that it was appropriate that it went to the Economic Development, Science, and Innovation Committee. I’m sure that that is right, but why I thought it would have been a good idea to go to the Environment Committee—although we are very busy—is that, of course, this bill is about climate change, and climate change is something very important for both New Zealand, the Pacific, and the world.

This bill deals with both mitigation and adaptation, and that is through the standards that are looking for risks—so, really, that adaptation-thinking around climate change—and for opportunities, so the mitigation part of it. So it is a great bill that I’m very happy to be speaking on. Like many of the previous speakers have said, we need to tackle climate change in many and varied ways, and this is one of those many and varied ways.

We’ve heard from the Opposition—from National, at least—that it sounds like they want to do much more in terms of climate change, and, I think, in both mitigation and adaptation. That brings me great joy. I’m very happy for National in the Opposition to be so ambitious around climate change, and I really look forward to more bipartisan movement in that direction.

What this bill does is it really focuses companies on their reporting requirements. How companies often work is that when you require them to report on something, then that means that they really pay some attention to it and it incentivises change. In this case, it is also useful that we’re pricing, really, the risks and opportunities. It is true to say that many assets won’t hold their value in a low-carbon world, and so we need to look to incentivise these opportunities. So for those reasons, I’m happy to commend this bill to the House. Thank you.