News & Updates

Ramping up Climate Accountability - Climate Disclosures

Thu Aug. 18th 2022

Ramping up Climate Accountability

Climate extremes are on the rise, not only in New Zealand but around the world. The authoritative source of information on climate science, the Inter-Governmental Panel on Climate Change (IPCC) has warned that we are breaching thresholds that result in irreversible impacts. Even this level of alarm may be understating the speed and severity of the climate crisis, due to political pressure on the IPCC and the requirement for government consensus.

If these weather extremes are already being experienced at our current global temperature rise of 1.1˚C, what does 2˚C look like? Or even the supposedly safe level of 1.5˚C?


As the urgency of action on climate change ramps up, everyone needs to take action and be accountable for their impacts – government, individuals, companies and investment funds. Information is essential to hold these actors into account. For example, governments commitments are compared by Climate Action Tracker, and New Zealand’s current targets and policies are deemed to be ‘highly insufficient’.

We also need accurate and comparable information to hold companies and investment funds to account. The good news is that the government has passed the first law requiring climate information to be published by the largest companies and fund managers, around 200 reporting entities. The law is now being translated into standards by a government agency, the External Reporting Board (XRB).

Climate Disclosure

Mindful Money supports much of the framework proposed by the XRB, and we recognise that there is a process of strengthening standards over time. However, the draft standards need to be improved in two key areas in order to provide information for accountability.

Information for climate accountability

Firstly, the XRB’s draft climate reporting standards specify those with financial interests as the primary users of climate reporting. This ignores the interests of stakeholders - including customers, suppliers, iwi, climate action advocates and the public - who want to know about the climate performance of companies and investment funds. Climate reporting should support accountability, not just financial interests.

A focus on financial information for shareholders reflects the outdated thinking of Milton Friedman and free market economists who argued business has no responsibility towards society for their actions, only to their shareholders. This is out of step with contemporary thinking about the stakeholder economy – even the US Business Roundtable has called for stakeholder interests to be placed at the heart of corporate governance. Companies and investment funds have a responsibility towards society not just those with financial interests, and stakeholders need the information to hold them to account. Stakeholders should also be defined as primary users of climate reporting.

What gets reported gets managed

Secondly, the XRB’s draft standard also has a narrow focus on what needs to be reported. The draft requires reporting on the financial costs or opportunities of the climate on business (single materiality), but not also the impact of business on the climate (double materiality). While some impact information is included (such as emissions), other information about climate impact is only included if it affects the value of the company.

This is a missed opportunity. People across New Zealand, including stakeholders and most investors, are concerned about the impact of companies and funds on the climate and what they are doing to reduce their impact.

A single materiality approach also puts New Zealand disclosure out of step with the EU. A commitment to double materiality should be included in the standard, even if it is subject to a transition period for its implementation.

Comparable climate data

Thirdly, accountability also needs climate data that is consistent and comparable. Mindful Money is calling for a common dataset on climate trends and physical impacts to be made available to the reporting entities and consistent standards on scenarios to ensure investors and stakeholders can compare the performance of companies and investment funds.

Other issues beyond climate disclosure

In addition to their current consultation, the XRB has also been asked to prepare voluntary reporting standards on social and environmental issues. These are urgently needed. The 2022 annual survey undertaken by Mindful Money and RIAA shows more than half of the public are concerned about greenwashing. The FMA’s recent report on Integrated Financial Products also showed there is insufficient evidence for the assertions made about responsible investment practices.

Common measures and sources of evidence are needed, rather than a patchwork of measures chosen by each reporting entity. There are already extensive reporting requirements on many different financial and institutional issues, but none on social and environmental issues. Standards to be prepared by the XRB should be the basis of mandatory reporting requirements, allowing comparability across companies and investment funds, and accountability for performance.

Responses to the XRB’s consultation are due by 26 September.