Bayly AndrewANDREW BAYLY (National—Port Waikato): Thank you Mr Speaker. It's a pleasure to be talking on the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill first reading.First of all I just want to check that that member who just sat down Jamie Strange actually just said that businesses weren't aware of their climate change obligations.Jamie Strange: Some businesses.ANDREW BAYLY: Some businesses. Well first of all I'd like to take issue with that comment because I think businesses have adopted ESR reporting for years particularly the type of entities that are included in this bill. In fact they've been leading the Government in many ways around that thinking. It's been regularly in place that type of ESR reporting—environmental social responsibility - type reporting—for probably 15 years particularly at the level of entities that are captured by this bill.So what does this bill do? It introduces mandatory climate-related disclosure requirements for certain [firms] … considered to have a higher level of public accountability including listed issuers large banks large non-bank deposit takers and large insurers and large managers in respect of managed investment schemes." My colleague the Hon Michael Woodhouse noted that we will be supporting this bill. And just before I start talking about the bill in detail I just want to be clear that National supports the desire and intent to reduce our carbon emissions. After all the National Party signed up to the Paris accord. So I want to put that on the table. But that does not mean that a bill like this does not have some failings. We will be supporting it to first reading but there's some significant issues in this bill. The first is I suppose the paternalistic approach that is taken. The bill says that the primary purpose of this proposed intervention—and I'm referring to the regulatory impact report. The primary purpose of this proposed "intervention"—that's the word written by Government officials—is to promote the efficient operation of financial markets through greater transparency and more information.Now I'd have to say to you first of all that businesses do need to understand their obligations and responsibilities and most directors—certainly I would say every single director of any of these organisations—if they haven't been considering it they are in serious issue particularly if you're a listed company because there is a requirement under the listing rules to have regard for these types of issues. And so this is an overlay to what's already in the listing rules trying to impose this mandatory requirement on directors.I think we've seen a little bit of this coming out of the Government. We've seen it yesterday in the debate with Mr Robertson's letter to Air New Zealand—this sort of thought from this Government that they know best they know how to control business and that they should be controlling business. And the thing that worries me about this bill is how this bill requires an absolute mandatory requirement on it.The second thing—and I just do note that there were a number of submitters on this consultation around this bill and there were a number of supporters and I acknowledge those but there were some detractors significant organisations who opposed it on various grounds: Business New Zealand Chapman Tripp and the New Zealand Stock Exchange as I just alluded to. The worrying thing about this is whilst I understand the intent to disclose and we're going to talk about the comply or explain aspect of it the bit that worries me about this is how it will lead to different decision-making.Now at a high level global level it's fine. We want people to not invest in emission generating businesses or certainly reduce their level of investment in those and migrate to clean energy type investments particularly into better types of technologies. But I put it to you the way it's phrased and the way that it's going to operate will mean if you take for instance a concrete producing company which we all know produces a lot of emissions and if a pension fund wanted to invest in a new technology that produced an element of green concrete but still produced a lot of emissions but much lower than the current level of emissions—i.e. we're getting a better outcome and because concrete is still a requisite requirement of our construction industry—I would dare say that a pension fund is going to be very very unlikely to contemplate an investment like that because of the public notification of that and the possible victimisation as a result of the disclosure around that investment. I think that means that we're going to see many of these types of organisations many of them professional investors particularly the funds choosing not to even contemplate investments that would otherwise lead to a better environment for the world and certainly for New Zealand by reducing their emissions. I think that's a real shame. I don't think the bill foresees that. I think that the proposed bill is rather hard and fast in saying "Thou shall not invest in those things because if you have to you have to disclose it and then you've got to go through the explanation of that." And I think that's a very difficult environment for people who want to be seen to be investing in better technologies that reduce emissions over time. The other aspect of it is this. I don't understand fully the "complain or explain" option. If you were to take that argument I've just put forward how does that operate? Hopefully during the select committee process that will be fully explained. I know there's some issues in the regulatory impact report on it but it's unclear what and how it will operate. But I just want to also highlight that there are some risks around this bill and it's worthwhile just noting them. Again they've been prepared by independent Government officials. The first one is introducing this bill at this particular point in time with the fallout from COVID and whether businesses are likely to be under greater pressure than usual for the next few months or years. I think that's less of a concern but it's certainly a concern. But also the Financial Markets Authority (FMA) considers that confidence in the new regime will be undermined if it proceeds as currently proposed because they consider there is an initial impracticality of compliance by managers of registered investment schemes. So again my colleagues spoke about the short duration to put this in place. Also as the current proposals apply to the FMA reported entities and not to private and non-issuer companies it may be considered an additional barrier for those companies listing on the stock exchange. That is a possible barrier. I don't think it's insurmountable though. But the other thing is the issue of penalties which I find quite considerable. They're covered in new section 461ZC in clause 7. So just to be clear every director of any of these entities will be perhaps a little bit surprised to know that at a personal level if they don't comply with the requirements—and there's an issue about what the requirements are—it is a five-year jail term or $500000 fine or at a business level a $2 million fine. So here we are. We've got pretty hefty fines for mandatory disclosure on a regime where we don't yet know what is going to be reported and how it's going to be reported because we haven't had the feedback from the reporting board and secondly we don't know how auditors are actually going to be able to undertake the role of checking these statements. There's a need to actually upskill them once we know what the framework is that they need to measure whether a company is actually complying or not. I think these are all very practical questions. I seriously think the short report-back date is one of the issues but the implementation date is going to be quite something for even these very large companies to be able to comply quickly or otherwise face at a personal level a fine of $500000 or imprisonment for a period of five years."