Woodhouse MichaelHon MICHAEL WOODHOUSE (National): Given Minister Clark's comments I think it's appropriate to acknowledge the millions of people around the world who will be tuning into this highly important and world-leading debate. I think the Minister might find that we're probably not as far ahead of the rest of the world as he thinks and claims we are and I'll go into that in some detail. But I think it's fair to say that if one picks up a textbook on financial accounting and turns to chapter 1 the definition of financial reports is in plain English to provide information useful for decision making or words to that effect and we've got a very very mature and robust framework for the provision and reporting of financial information. It's set out in the Financial Reporting Act and the Financial Markets Conduct Act. As the Minister says it's overseen by the External Reporting Board (XRB) and they provide for the accounting standards and financial reporting standards that are consistent with generally accepted accounting principles and that's a longstanding convention and law. When I was studying accounting a million years ago we were already moving away from financial-only reporting and into things like triple bottom line reporting and elements of meeting organisation's corporate and social responsibility. The nomenclature may have changed over time the imperatives may have changed over time but good companies will provide a range of non-financial performance information as well in order to inform stakeholders who are staff their customers and indeed capital markets. In terms of the climate reporting in reading this bill I was prompted to refer to some research from the professor of accounting at the University of Otago Professor David Lont—my former lecturer actually—who has done a tremendous amount of work on the links between disclosures of greenhouse gas emissions and company stock prices and as long ago as 10 years ago he was reporting the very nimble almost real-time impact that disclosures of greenhouse gas emissions had on stock price. He analysed Canadian and Standard & Poor's 500 data that was publicly available of those organisations that voluntarily disclosed this information and noted that the stock price was affected almost in real time in the same day that that information was released. Actually the really interesting part of that was not only was it the stock price of the firms that did disclose greenhouse gas data so too was the stock price of those companies in the same markets that did not. So if one thinks of an oil company or a petrol retailer that disclosed—good or bad—their stock market price was affected but if another competitor had not disclosed and was not doing the sort of things that that company was doing they would be negatively affected. So there is a much more mature I think element of the link between the information capital markets than perhaps the Minister portrayed. He nods and I hope that that is in agreement with that. One of the things that I think we don't have though is a robust taxonomy or framework for reporting and I think the Minister used the words that I had already written down by coincidence—clear consistent and comparable"—because for the information to be the most valuable it has to have those attributes. It's actually for that reason and because we are starting from a point where I don't think there is the level of accepted comparability and consistency and clarity that the XRB at least are going to have to take quite a bit of time and consult I hope with good people like Professor Lont to be able to come up with an agreed set of standards that that is able to be compared. I am initially disappointed on that basis then that the Government recommends to this House that the report-back date be four months and for that reason the National Party will be opposing the report-back date. But as it is that the devil is not in the detail of the bill but in the XRB's work in terms of developing those reporting standards and taxonomies our rebuke will be much more mild than it otherwise might have been on that point. I do worry. We've got a lot to do over the next four months particularly with an important Budget coming up but I hope we don't skinny this up. I'm not sure if the Minister mentioned which select committee this is going to. Is it the commerce select committee? Hon Dr David Clark: Education—Hon MICHAEL WOODHOUSE: Education—Hon Dr David Clark: —sorry the Economic Development Science and Innovation Committee. Hon MICHAEL WOODHOUSE: Economic Development Science and Innovation Committee. Well the members of the Finance and Expenditure Committee will be disappointed by that. This is an accountant's dream—I may even substitute myself on to that committee. I want to come back to this issue of the scope of those climate-related disclosures because on page 2 of the general purpose statement in the bill I was fascinated to read this: "The Bill also provides for the XRB to issue guidance on a wider range of environmental social governance … and other non-financial matters that can be applied by entities on a voluntary basis." Now the concern is not that we do that. The concern is that one of the things the Finance and Expenditure Committee did yesterday—as recently as yesterday—was hear from Treasury on the Auditor-General's report into the Government's accounts for 2019-20 and the critique of the Auditor-General was that the non-financial performance measures across Government entities was low and inconsistent and that's been a narrative that I've heard for 13 years now. Treasury came and talked about "We're good at counting widgets but we're not that good at counting outcomes." and I don't say that to criticise anyone in Government or in the public sector. It's to illustrate how very difficult this can be and how important it is that we get it right so we're not imposing even very large companies with the burden of reporting on matters that are quite esoteric or difficult. So I do want to just express that concern that I think what we do need to have is perhaps a more staged process where we can evolve this over time as we do with financial reporting standards starting with the stuff that we can agree that we can do measure and report and then perhaps evolve into some of those broader issues around environmental sustainability. The last thing I would say about the purpose of the bill was that I think the Government might be a little over its skis on the degree to which the purpose of the bill is actually to influence investment. So it says "Financial markets globally can play a major part in shifting investment away from emission-intensive activities and towards low-emission resilient development pathways." and that's true—it can. But I'm not sure that the legislation can do that. The legislation is designed I hope to do what chapter 1 of every financial accounting text says—that is to provide information useful for decision making. We're not going to change the world of capital markets with this Act when it's passed but I think we are going to be able to shine a light on things that are important to all of us actually. What worries me a little bit about the language in that purpose is the potential to demonise individual companies when the goal is to take a holistic and global approach to greenhouse gas emissions reduction because there are going to be a number of sectors and companies that despite their best efforts will still have net-positive carbon emissions. Their efforts however good will not change that until we wholly transition to a carbon-negative—not a carbon-neutral—economy and that could take generations. So that concerns me a little bit—that we've got to make sure that we have effectively neutral reporting measures not ones that seek to be punitive or punish companies. Now that said if a company is performing badly and that's reflected in their reports then fair enough. That should come up in the same way that if a company is performing financially poorly then the stock market and their investors will react accordingly. But we've just got to be a little bit careful not to get too over our skis on that. The last thing I would say—and I think Mr Bayly is also going to raise this—is there are some concerns around the penalties regime which the regulatory impact statement did say was well above what was being recommended by officials because I think what we want to do is encourage good behaviour rather than punish bad behaviour. But with that the National Party will be supporting this bill at first reading. I'm optimistic—not yet confident but optimistic—we will be able to support it through all stages and that's why I'm concerned about the four-month report back. But let's hear what the submitters have to say and let's have a good select committee process."