Banks of New Zealand to save global environment

Climate change is a topic which remains on a global political agenda for a long time. However in June 2021 the passionate discussions have finally lead to a mandatory guidelines about the climate finance disclosure.

The G-7 representatives agreed to implement an obligatory financial reporting related to the climate impact. This new set of rules aimed to mandate financial institutions to reveal their influence on the environment.

Amongst the first pioneers to mandate the new rules became New Zealand. At the end of October 2021 the local government adopted the new federal law imposing the reporting duty over the financial institutions.

The new disclosure rules will become effective starting from 2023. The term “financial institution” for the purposes of the new law entail the wide range of players. Amongst them are insurance companies, banks, lending and investment institutions with annual turnover more than USD 100 billions.

The New Zealand’s commitment to reduce the climate impact has a story behind. According to the statistic data the country’s emissions in the atmosphere rose by 60% for the last 30 years. It puts the New Zealand in the first echelon of the most polluted countries on the planet.

The purpose of the new law is not just to implement a climate reporting “as it is”. The utmost goal is to ensure that the financial industry has a “net-zero” influence over the climate. The financial institutions would need to adopt significant structural and administrative changes to enhance the sustainable development.

In particular, the new law requires the managerial board to oversight the climate risks in their short-term and long- term strategic planning. The law might also affect ordinary employees of the financial institutions. It is possible to suggest that some of them would need to avoid travelling for the business purposes in order to reduce the emissions.

The financial industry of the New Zealand have warmly welcomed the new law and expressed their readiness to commit to the new reporting rules. However, the practical effect of the new law would be possible to evaluate only in the long-term prospective.

Should you have any questions about how the new law might affect your business in the global context, do not hesitate to contact us.