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New Zealand: Financial firms need to educate about climate risks


How environmentally harmful financial transactions really are is often unclear. Now New Zealand is taking a new path: bankers and investors are to be obliged by law to point out climate risks from the outset.

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Lake Wakatipu on the South Island of New Zealand

Photo: Henning Gloystein / REUTERS

Whether buying shares from airlines, chemical companies and large real estate companies or buying private homes and pension funds: Almost every business that banks, insurers and investment managers do has an impact on the climate.

New Zealand is the first country in the world to have passed a law that also obliges the financial sector to consider the effects of climate change on its business - and to show the risks to its customers and shareholders.

All banks with assets of more than one billion New Zealand dollars, insurers with more than the corresponding amount of assets under management and all equity and bond issuers listed on the country's stock exchange will therefore have to provide comprehensive information on the role of climate change in the future.

You cannot become climate neutral by 2050 "if the financial sector does not know what impact your investments have on the climate," said Climate Minister James Shaw.

"This law will bring climate risk and resilience to the heart of financial and business decision-making."

First reports expected in 2023

The bill aims to oblige financial companies to explain how they deal with climate-related risks and opportunities.

About 200 of the largest companies in the country and several foreign companies that hit the $ 1 billion threshold would be affected by the law.

The bill has already been submitted to the country's parliament and is expected to be dealt with in the first reading this week.

The New Zealand Herald explains how the law is supposed to work: If, for example, an airport is built on a coast likely to be affected by a rise in sea levels, the operator would have to inform its owners about these dangers.

Likewise, according to the newspaper, there is a need to educate when assets could suffer unexpected depreciation due to climate change - for example, shareholders in mining companies that coal investments can mean losses if the government switches to renewable energy.

Disclosure in the annual reports should be required for fiscal years from 2022, once the law is passed.

This means that the first corresponding reports from companies are expected in 2023.

The New Zealand government announced last September that it would require the financial sector to report on climate risks, and those who cannot provide information would have to explain their reasons for doing so.

With this policy, New Zealand is responding to one of the key climate and environmental risks according to the World Economic Forum (WEF).

The New Zealand government also introduced several measures to reduce CO2 emissions during its second term in office.

She promised to make the public sector climate-neutral by 2025 and to buy only emission-free buses for local public transport from the middle of this decade.

Prime Minister Jacinda Ardern, who was re-elected last October and gave her Labor party the biggest electoral victory in half a century, had described climate change as the "nuclear-free moment of our generation."

apr / Reuters

Source: spiegel

All business articles on 2021-04-13

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