New Zealand passed the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill on Thursday, which requires financial institutions holding more than NZ $1 billion (about US $715 million) to make mandatory disclosures regarding the climate risks and opportunities of their businesses. The goal of the legislation, according to Climate Change Minister James Shaw, is to “encourage entities to become more sustainable by factoring the short, medium, and long-term effects of climate change into their business decisions.”

This is the first law of its kind. Other countries, such as the United States, are currently discussing similar regulations.

Commerce and Consumer Affairs Minister David Clark said that the legislation is expected to make a significant contribution to New Zealand’s goal of achieving carbon neutrality by 2050 and carbon neutrality in the public sector by 2025. Once the bill is granted Royal assent, whereby the head of state approves the bill after the legislature, it will require disclosures from the financial year 2023 forward.

Disclosures will follow the form set by New Zealand’s independent accounting standards-setter, the External Reporting Board. Environmental, Social, Governance (ESG) disclosure has suffered from a multitude of voluntary disclosure standards, making it difficult to compare between companies and years. The External Reporting Board has made reference to the GHG Protocol disclosure format set by the World Resource Institute, a DC-based international nonprofit. Climate disclosure standards are expected to be a topic at UN Climate Change Conference 2022 (COP 27) in November 2021.