Climate-Related Financial Risk and Opportunities Reporting
What you should know about RNBZ requirements
While the Northern Hemisphere is experiencing record-smashing heat with the United Nations Secretary-General, Antonio Guterres, claiming “the era of global warming has ended; the era or global boiling has arrived”, here in New Zealand we’ve experienced the ‘big wet’ that has taken lives, flooded home and ruined harvests. These weather events are likely to appear more frequently thanks to climate change. But what’s the association between climate change and financial risk management?
The Reserve Bank of New Zealand (RBNZ) requires registered banks and licensed non-bank deposit takers to report on their climate-related financial risks and opportunities as part of their regular financial reporting obligations. This reporting requirement is aimed at ensuring that financial institutions understand and manage the risks posed by climate change to their businesses, customers, and the wider economy.
The RBNZ’s sustainability reporting requirements are aligned with international standards, such as the Task Force on Climate-related Financial Disclosures, and aim to provide stakeholders with greater transparency into financial institutions’ climate-related risks and opportunities. Their sustainability reporting framework requires financial institutions to provide information against four key areas.
This includes information on the financial institution’s governance structures, policies and procedures related to climate change and sustainability.
Financial institutions must provide details on their strategies for managing climate-related risks and opportunities, including how they are integrated into the organization's overall business strategy.
3. Risk management
Financial institutions must assess and disclose the climate-related risks and opportunities that they face and describe how they are being managed.
4. Metrics and targets
Financial institutions must report on relevant climate-related metrics and targets, including those related to emissions reduction and energy efficiency.
By requiring financial institutions to report on their climate-related risks and opportunities, the RBNZ aims to promote the development of a more sustainable financial system in New Zealand, while also helping to protect the stability of the financial sector and the wider economy.