NOVEMBER 2021

Climate-related
Disclosures regime
Implementation approach

ContentsPurpose2

About the CRD legislation

2

Key implementation work streams and indicative timeline

3

Implementation of the Climate-related Disclosures regime

3

Policy and legislation

3

Standard setter

4Regulator

4

Reporting entities

4

From ‘build’ to ‘operate’

4

Capability build: to December 2022

5

Setting initial compliance expectations: 2023 and 2024

5

Supporting development of best practice compliance: 2024 and 2025

5

Steady state guidance, monitoring and enforcement: 2026 and beyond

5Regulatory approach5

Climate-related Disclosure regime: Implementation approach

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Purpose
1. The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill (CRD Bill)
received Royal assent on 27 October 2021.
2. This document briefly explains the Financial Sector (Climate-related Disclosures and Other Matters)
Amendment Act 2021 (the CRD legislation) and outlines the Financial Markets Authority’s (FMA)
implementation approach for the CRD regime over a period of approximately 4 years, through to2025/26. It sets out the roles and responsibilities of the various government agencies, to help industry
understand ‘who is doing what’ with regard to CRD.
3. In developing our implementation approach, we have consulted with MBIE, MfE and XRB.

About the CRD legislation
4. The CRD Bill amends the Financial Markets Conduct Act 2013 (the FMC Act), the Financial ReportingAct 2013 and the Public Audit Act 2001. The CRD Bill inserts a new Part 7A to the FMC Act which
provides a framework to require certain climate reporting entities (CREs) to comply with record-keeping
requirements and produce annual climate statements.
5. There are three phases to the commencement date of the CRD legislation. The first phase is to bring
into immediate effect the changes to the Financial Reporting Act, which largely affect the functions andresponsibilities of the XRB under the new regime and the introduction of climate standards. The second
phase, which will happen within 12 months of the Royal assent, is to bring into force various changes tothe FMC Act, mainly around requiring climate related disclosures for certain FMC reporting entities. The
third phase, which will occur by the 3rd anniversary of the Royal assent, is to bring in the requirements
for assurance of climate statements with regard to greenhouse gas emission disclosures.
6. The Government’s expressed purposes for the CRD legislation are:-to ensure that the effects of climate change are routinely considered in business, investment,lending, and insurance underwriting decisions; andto help CREs better demonstrate responsibility and foresight in their consideration of climate issues;
andto lead to smarter, more efficient allocation of capital, and help smooth the transition to a moresustainable, low-emissions economy.

7. Under the CRD legislation, CREs will be required to:-prepare an annual climate statement that discloses information about the effects of climate changeon their business or any fund they manage
prepare climate statements in accordance with climate standards issued by the independent
External Reporting Board (XRB)
obtain independent assurance about the part of the climate statement that relates to the disclosureof greenhouse gas emissions
make the climate statements available to the public, andcomply with record-keeping requirements.

Climate-related Disclosure regime: Implementation approach

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8. Climate statements will be required by a CRE in respect of accounting periods that commence on orafter the date the XRB issues the first relevant climate standard. The XRB is currently expecting to issue
the first climate standard by December 2022, which means climate statements will likely be required tobe published from early 2024 (at the earliest), for accounting periods that start on or after 1 January2023.

Key implementation work streams and indicative timeline
Implementation of the Climate-related Disclosures regime

9. Several public sector entities have been involved in the commencement of the CRD regime, asillustrated above. The following paragraphs outline the respective roles of each agency, in relation to theimplementation of the CRD regime and the associated timeline.
Policy and legislation
10. MBIE and the MfE have responsibility for policy advice to the Government on the CRD regime,
preparing the CRD Bill, and engaging with the public sector entities that have responsibilities under theregime (including the XRB and the FMA). MBIE is also considering whether associated regulations will
be required. MBIE and MfE are also working on proposals for an assurance practitioner regime.
For more information on the regime click here: MBIE Mandatory climate-related disclosures

Climate-related Disclosure regime: Implementation approach

Page 3Standard setter
11. The XRB has responsibility within the CRD regime for issuing climate standards. The XRB has further
information on its website about the process and timeline: XRB Climate-related disclosures. For
example, based on the current anticipated timeframe, a CRE with a 31 March balance date (reporting
period 1 April – 31 March) would be required to prepare their first climate statement as part of their 31March 2024 reporting. The FMA expects the first climate statements to be filed as outlined below 1:
Balance date ending

Climate statements filed by

31 December 2023

30 April 2024

31 March 2024

31 July 2024

30 June 2024

31 October 2024

30 September 2024

31 January 2025

Regulator
12. The FMA is responsible for independent monitoring and enforcement of the CRD regime, as well as
providing guidance about compliance expectations, and reporting on our monitoring activities andfindings.
Reporting entities
13. Entities that are required by the CRD legislation to produce climate statements will be known as CREs.
The following entities are CREs:--large listed issuers of quoted equity securities or quoted debt securities. An equity issuer is large if
the market price of all its equity securities exceeds $60 million. A debt issuer is large if the facevalue of its quoted debt exceeds $60 million. (Issuers listed on growth markets are excluded fromCRE definition);
registered banks, credit unions, and building societies with total assets over $1 billion;
licensed insurers with total assets over $1 billion or annual gross premium revenue over $250m; andmanagers of registered schemes (other than restricted schemes) with greater than $1 billion in total
assets under management (e.g, KiwiSaver fund managers, PIEs, etc).

The CRD regime will capture approximately 200 entities.

From ‘build’ to ‘operate’
14. The FMA’s implementation approach to the CRD regime will evolve over the next four years. The FMA
envisages four stages:

1 Any CRE with an alternate reporting period will file their climate statements 4 months after their 2024 balance date.

Climate-related Disclosure regime: Implementation approach

Page 4Capability build: to December 2022
a. The FMA will issue early high-level guidance on compliance expectations to support the market byDecember 2022, with further guidance produced over the 2023 calendar year. In this early phase,
the FMA will be focused on recruitment and building our capability. The FMA will also work closelywith the XRB as it develops the climate standards. The FMA anticipates funding to resource ourwork in respect of this regime will be available from 1 July 2022.
Setting initial compliance expectations: 2023 and 2024b. The first climate statements will likely be lodged in early 2024. During this period, the FMA will focus
on setting expectations for CREs to support compliance. We will continue to engage with CREs, theXRB, assurance practitioners, and other key stakeholders. At the same time, we will continue tobuild our internal capability. We expect there will be a high degree of public interest in CRE climate
statements, meaning it is likely that we will need to triage a high volume of enquiries and complaints.
Our initial regulatory stance will be focused on supporting CREs and encouraging development ofgood practice. Accordingly, we will likely only take enforcement action where there has been serious
misconduct, such as failure to produce a climate statement, or where a climate statement is false ormisleading.
Supporting development of best practice compliance: 2024 and 2025
c. We expect an ongoing high degree of public interest in climate statements, with a continuing need totriage and respond to issues, enquiries and complaints. We anticipate updating our guidance oncompliance expectations in line with maturing sector capability and emerging good practice.
Steady state guidance, monitoring and enforcement: 2026 and beyondd. The FMA will seek to settle into its “steady state” level of monitoring (proactive sampling andassessment of climate statements). Good practice is likely to still be developing rather than settled;
accordingly, the FMA will continue to research and develop guidance on compliance expectations.

Regulatory approach
15. The FMA envisages taking a broadly educative and constructive approach, with a focus on issuing highlevel guidance on compliance expectations in the early stages, moving to a proactive regulatory role as
the CRD regime becomes established.
16. The FMA’s enforcement approach during the early years of the CRD regime will focus primarily only on
serious misconduct 2 as the sector learns and builds capability.

2 For further information see FMA’s regulatory response guidelines

Climate-related Disclosure regime: Implementation approach

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Climate-related Disclosure regime: Implementation approach

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