The broad-scale private sector support of the recommendations of the Task Force for Climate-related Disclosures (TCFD) in 2017 has been extraordinary. It has perhaps been one of the most remarkable climate change developments in the financial sector since the Paris Agreement highlighted the role of aligning financial flows with the climate goals in its Article 2.1c. While the Paris Agreement focused on achieving the climate targets, the TCFD adopted a complementary risk-focused perspective on climate change. However, despite the growing uptake, the quality and consistency of disclosures under TCFD have to date not met the needs of investors, nor those of regulators charged with ensuring financial stability.

In response to this deficit in disclosure quality, a growing number of countries are developing climate risk disclosure requirements for voluntary or mandatory reporting regimes to elicit clearer, more credible and more consistent information from reporting entities. At the same time, the TCFD itself has sought to provide additional detail on what good disclosure looks like, and a litany of non-governmental organisations and industry bodies have also sought to fill these gaps with their own work.

In 2021 Aotearoa New Zealand (NZ) became one of the first jurisdictions to legislate mandatory climate risk disclosure for publicly-listed companies, insurers, investors, and banks. Unlisted companies and government entities, except for a handful explicitly named, are currently excluded from the regime.

With the legislation having passed in late-2021, NZ’s External Reporting Board (XRB), the Crown Entity responsible for preparing and issuing NZ climate accounting standards, is proposing to develop a climate-related disclosures framework. The framework will comprise two climate disclosure standards and an authoritative notice containing key concepts to fit the disclosures into the general financial and sustainability-related reporting requirements in NZ. It will also provide sector-specific guidance on reporting against the standards.

The purpose of this report is to consider emerging global best practice for standards on climate risk disclosure regimes and how they might be adopted into the incoming mandatory regime in NZ. It is critical for internationally exposed investors and the overall outcome of the regime that the standards developed by the XRB reflect global best practice, avoid market fracturing, and deliver the information required to properly address and price climate risk. This report attempts to draw together a comprehensive picture of the international trends in climate risk disclosure standards and apply these to the NZ context, along with a series of recommendations.