Clark DavidFINANCIAL SECTOR (CLIMATE-RELATED DISCLOSURES AND OTHER MATTERS) AMENDMENT BILLFirst ReadingHon Dr DAVID CLARK (Minister of Commerce and Consumer Affairs): I seek leave to present a legislative statement on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill. ASSISTANT SPEAKER (Hon Jenny Salesa): Leave has been sought for that course of that action. Is there any objection? There is none. Hon Dr DAVID CLARK: I move That the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill be now read a first time. I nominate the Economic Development Science and Innovation Committee to consider the bill. At the appropriate time I intend to move that the bill be reported to the House four months and one day after it has had its first reading. Climate change provides the overall context for the bill that we have before us today. On 2 December 2020 the Government declared a climate emergency committing New Zealand to urgent action on reducing emissions. By declaring a climate emergency we joined the over 1800 jurisdictions in 32 countries to do the same and to commit to reducing emissions to avoid a more than 1.5 degree Celsius rise in global warming. There are a number of actions the Government has taken in response to that climate emergency not least amongst them is the setting up of an independent climate commission which will set carbon budgets—we have one in draft currently. We've done things like biofuels sales blend mandating we have committed money to enable councils to decarbonise the public transport fleet by 2035 we've nominated clean-car import standards and so on and so forth. But this bill today I am convinced will be one of the most important things we do in this Parliament. This bill today is a world first and I want at the outset to acknowledge the Hon James Shaw for his leadership in the work that we are passing through the Parliament today. I think when he speaks—and I expect he will shortly—he will relate to the House the thinking behind his involvement in the development of this bill. I believe it's going to make a very real difference and I believe it's one as I've said of the most important things we'll do and that goes back also to the leadership of our Prime Minister the Rt Hon Jacinda Ardern in labelling climate change this generation's nuclear-free moment. We are here today to make a real difference longer term because it is the right thing to do. Climate change is about intergenerational equity as much as it is about saving the planet. We know that climate change is real. It presents real risks to our survival as a species as well as to the ecosystems that surround us. It also presents risks to the financial sector. There are risks currently of stranded assets as business models change as we adapt to a world where we need to take action. We are exposed to risks of sea-level rise. We are exposed to physical risks. There are risks currently to our supply chains and our goods and services in the future will have to travel through low-carbon and more resilient routes. These risks are real. The risks to investors are something that we're thinking about today and as we do that—as we think about where capital is invested in future and send clear signals around reporting—what we're doing is providing better market information. We know that markets basically are about information. They are about making sure that investors know where capital is wisely put and where it is unwisely put. So if that capital is going to assets that are going to make for a better more climate-friendly future that is something we want to see more of. If investment is going into assets that could end up stranded as we move away from a polluting culture and from outdated technologies well that means we have the inefficient allocation of capital and that means less effective markets. So for those of us who are passionate about markets—and I suspect there'll be a few but maybe not everybody in this place—we will I hope universally extoll the benefits of these measures in this Parliament. While it's a world first and we've worked closely with the UK on this legislation it's also true that other countries are looking very closely. The EU has signalled an interest here; I'm sure the US will start to move soon. We will be the first but we will be one of many that move towards making sure we have better information more standardised information from markets so that we have more efficient allocation of capital for a better future for all citizens in this country and around the world. This is a meaningful thing that we are doing here today. So having said that by way of introductory comment I realise I'm halfway through my speaking time already. I do feel passionately about this bill but I want to speak to some of the detail. The main aim is to move to a position where the effects of climate change become routinely considered as a part of business investment decisions. It'll contribute towards that goal we've set of becoming carbon-neutral by 2050. Effectively it does this by requiring around 200 of the largest and most important businesses participating in the New Zealand financial markets to disclose clear comparable and consistent information about the risks and opportunities presented by climate change some of the stuff I've spoken to already: where the assets present risks where they're likely to have a future that's less certain and so on. That current lack of reliable information about the impact of climate change on business is serious because it can lead to mispricing in the markets the mispricing of assets and the misallocation of capital and that means that investors lenders and other decision makers cannot then make the right decisions. There is risk of corrections in the market which can be abrupt. We know that climate change doesn't just present risk; it also presents opportunities. That information where it's clearly presented shows where people can invest wisely in the future. Trillions of dollars will need to be invested globally by 2050 to achieve the Paris Agreement goal of keeping the increase in global temperatures to within 2 degrees Celsius of pre-industrial levels and to pursue efforts to limit the increase to 1.5 degrees. New Zealand businesses are well placed here to take advantage of those opportunities. It's really important to remember that in areas like energy production food production and pollution reduction. The disclosure regime will contribute to this and it will help I am sure attract investment more broadly. I suspect it will also lead to a situation where those who are not currently included in the bill will be considering how they report because they will be trying to attract investment as well. The standards that the XRB—the External Reporting Board—sets for this financial reporting will be something that other entities will be looking to as they want to attract capital in the future. So there's four main elements to the bill. The first is it introduces mandatory climate-related disclosures for most listed issuers along with large registered banks licensed insurers and registered managers of investment schemes. Secondly it requires that the disclosures be made in accordance with climate standards that will be issued by the External Reporting Board—known as the XRB to those in financial circles. Thirdly the Financial Markets Authority—known as the FMA—will be responsible for enforcing compliance and it will do that under its current existing statutory powers including monitoring the disclosures. Fourthly the XRB will be able to issue guidance material on environmental social and governance reporting and other wider aspects of non-financial reporting. So those are the concrete bits of this. As I've said folks around the world are looking at this and I suspect we'll see many other regimes look similarly. Late last year the International Financial Reporting Standards the foundation that looks at international accounting standards consulted publicly on a proposal to establish a sustainability standards board with a climate-first mandate. So there you go the global accounting movement is shuffling in this direction as well.So I'm mindful of the time Madam Speaker but can I say that there is evidence around the world that people are seeing the opportunity here to guide companies to give the opportunity for companies to present clear information to markets so that markets can make the right decisions into the future and if I can just in the time remaining give a couple of examples of recent investments. This is to give a scale of the opportunity. A study has found that globally we need $6.3 trillion a year in infrastructure through to 2030—Angie Warren-Clark: How much? Hon Dr DAVID CLARK: —$6.9 trillion—and that's around thinking differently about how we do infrastructure. We've had estimates: UBS the Swiss bank calculated it would take US$140 trillion to decarbonise the energy supply more broadly. I've got a list of statistics. These are the kinds of investments that will be needed to keep climate change below 1.5 degrees Celsius—below pre-industrial levels. So in closing can I acknowledge the leadership of the Rt Hon Jacinda Ardern and the hard work and foresight of the Hon James Shaw in this work. I am committed to successfully implementing these reforms and I thank those who have worked on them before me. ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website. The question is that the motion be agreed to.