Woodhouse MichaelHon MICHAEL WOODHOUSE (National): Thank you Madam Speaker. I want to firstly join with the chair of the Economic Development Science and Innovation Committee in thanking the submitters on this bill and the officials for the good work that they have done. As my colleague Mr McClay has pointed out National will continue to support this but with some caveats. Now I wasn't on the committee that considered the bill but I did speak on this bill in the first reading and I'm pleased to do so again in the second reading having watched progress from the bleachers. I heard Mr Shaw who was introducing the bill make what I believe was a Nostradamus-like faux pas in leaving out the word large" from his description of the list of companies that are going to be affected by that. It is true that at the moment the requirements are going to be for all large listed companies but he did show an indication and stated an indication that the Government's intention would be once the regime is in place to widen the scope of the reporting requirements to a larger number of listed companies then large private companies and then probably small private companies and then it becomes part of the international sort of financial reporting requirements that companies need to go through. What was interesting was that he was very clear that public entities would be excluded from that on the basis that there are already expectations on them for similar reporting and I want to remind the House of the comment I made in the first reading. MPs who have been here for a few years have heard successive reports from the Office of the Auditor-General about the relatively poor quality of the non-financial performance reporting of public entities and it's something that's been a bit of an irritant to me that when we look at the audit reports and we hear from the auditors for annual review that we get the same kind of "should do better" reports that I've been hearing since about 2013. It's a source of frustration for the auditors as well. They would like to be able to see improvements in the quality of non-financial information and I'm not saying it's easy. It is actually quite difficult but it shouldn't be as difficult as it has transpired. I think there needs to be a much more common taxonomy for statements of service performance and non-financial information from public entities more generally and if that's the track record of our public entities I think it would behove the Government to consider a much higher standard for environmental reporting on them rather than just leaving it to them to deal with. This is a fascinating description actually of what we're talking in respect of. I think what most people thought about when this bill came in was the impact of business on climate but actually it's very clear that this is about the impact of climate change on business and that changes and makes much more complicated the regime for reporting. I had expressed a hope at first reading that through the committee process we would get some sort of sense of what the reporting regime would look like but not only did that not happen; we've actually kicked the can down the road a little bit by the extension of time for the requirements to come in in order that the Financial Markets Authority and the External Reporting Board can actually devise those standards. I do have a bit of a problem with that on a couple of fronts. One is the provision of information comes at a cost. These are not costless reports. There's quite an investment that needs to be made in them and the cost of providing that information needs to be exceeded by the benefits to the users and those users are going to be a number of stakeholders—banks shareholders regulators customers and so on—and we're actually none the wiser. It's only a minor irritant but I do think we should have a bit better clarity about what the costs and benefits of these reporting regimes will be before we start to put them in. I also want to just come back to this issue about sort of the impact that that kind of reverse thing of the impact of climate change on business and not the other way round and also as Mr McClay mentioned—and I want to elaborate on this—there's actually not only the direct impact of climate change on business but the equally direct impact of Government responses to climate change through the regulatory process on business. I want to use an example of that and try and sort of imagine how a reporting regime might for example cope with the oil and gas ban that has been imposed or as it's euphemistically known by this Government in the previous Parliament because regardless of the platitudes of the Minister of Energy and Resources about how much time we have to adjust and what little difference that's going to make to organisations in the oil and gas industry the province of Taranaki has a quite different view. The stakeholders have a different view. And a report on the impact of climate change on business is going to have some interesting things to say about the reality rather than the rhetoric of the impact of Government policies on business as they relate to climate change.I think we can also use another example of for example the Overseas Investment Act changes enabling farm to forestry conversions which is a direct climate change response but it could have negative impacts on large businesses who are not in that field particularly for example Fonterra—it may have an impact on their ability to be able to source milkfat for example. I mean the impact of Government regulation on this is real. There are a plethora of examples I could use and how that's going to be folded into a reporting regime I think is going to be very very important.The last thing I would say about this is that most reporting requirements are ex post—what we call ex post. They are reports of what has happened in the past. The easiest ones to look at are financial reports because they are firstly a balance sheet a snapshot of the statements of assets and liabilities of the company as well as the statements of income and expenditure. So readers—banks and shareholders—can get a pretty good assessment of the past activity compare it against the budgeted reports and then look at for example if there's a prospectus in capital raising statements of projected financial performance and so on. These are about predictions of the future and that's going to make these much more nebulous potentially quite subjective. That's where their value is going to be really really interesting.Now I'm a strong supporter of this and I talked about in my first reading the research from Professor David Lont at the University of Otago where he had looked at greenhouse gas emissions reporting and the immediacy of the effect on the share price not only of the organisations that reported on it but other organisations in the same industry that did not—had an effect on both of those groups of companies. But this is much more difficult to look at because we are looking at sometimes decades into the future of the impact of climate change on business and the predictability and certainty of that will become less and less and less the further out we are looking. So you know we have the sense that climate change is certain we don't know the quantum or the timing of it and so we're going to have similar subjectivity and variability in these sorts of reports. So it's going to be very difficult I think for the Financial Markets Authority to try and come up with a reporting framework that accommodates all of those variables.I just want to finish by agreeing with Mr McClay on the need for an exemption framework and our opposition to the removal of that from the bill—and we will put it back in by an amendment at the committee of the whole House. The risk we run is that we have reporting for its own sake. I think entities should be able to make statements about the lack of any impact of climate change on them and leave it for the readers to determine whether or not that is accurate and for regulators to decide whether that's appropriate. But to force people into a reporting regime that they don't believe applies to them I think is wrong. There are examples of this in New Zealand's financial reporting standards with differential reporting requirements for smaller companies or with different ownership models. So it's not unusual to have variations from a default reporting position. So I think we need to think more carefully about whether or not that change should be made.But with those caveats and with a sense that it's probably not going to set the world on fire—that's not a pun on climate change—it is a move in the right direction albeit slowly and subjectively."