Sustainability reporting – consider more than just New Zealand requirements

New Zealand sustainability reporting

New Zealand already has mandatory climate reporting for annual periods beginning on or after 1 January 2023.

The following types of large New Zealand entities must prepare climate-related disclosures for 31 December 2023 years under the Climate-Related Disclosures (CRD) regime.

Registered banks, credit unions, and building societies with total assets of more than $1 billion
Managers of registered investment schemes (other than restricted schemes) with greater than $1 billion in total assets under management
Licensed insurers with greater than $1 billion in total assets, or annual premium income greater than $250 million
Listed issuers of quoted equity securities with a combined market price exceeding $60 million
Listed issuers of quoted debt securities with a combined face value of quoted debt exceeding $60 million
Authorised Bodies, that are managers of registered schemes and operate under the licence of another manager, where the total assets under that licensee (including assets of all authorised bodies) exceeds $1 billion.

(Please refer to our July 2023 and October 2021 articles for more hereon.)

Although New Zealand climate reporting is only mandatory for the above entity types, it should be noted that certain other jurisdictions also require mandatory climate reporting based on other local requirements, which could impact on New Zealand entities not scoped into the above.

[Please refer below for a high-level overview of the current requirements in Australia, Europe, the USA sand Singapore.]

Other jurisdictions (other than those mentioned) may also require climate related disclosures, so it is important for all New Zealand entities to have a thorough understanding of where in the world they operate, and what local requirements in those areas are going forward.

It should also be noted that the New Zealand climate reporting standards (Aotearoa New Zealand Climate Standards) (NZ CS) were developed in New Zealand and differ from requirements elsewhere in the world and the (current) international sustainability-related reporting standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

NZ CS have similar requirements to (international standards) IFRS S1 and IFRS S2, however, differences do exist. Therefore any entities required to comply with NZ CS should gain familiarity with the NZ CS as soon as possible, as you cannot rely solely on any globally available guidance on IFRS S1 and IFRS S2 to assist you with your sustainability-related disclosure obligations.

Foreign issuers operating in New Zealand

At the time of writing, the Financial Markets Authority (FMA) has agreed in principle to grant a five-year exemption to foreign exempt issuers from their New Zealand climate-reporting obligations in either of the following circumstances:

New Zealand operations	Type of relief	Conditions for relief
The foreign exempt issuer does not have significant business operations or investments in New Zealand	Full relief	Must comply with any mandatory home jurisdiction laws or home stock exchange requirements regarding climate-related disclosures
The foreign exempt issuer has significant business operations or investments in New Zealand	Partial relief	Climate reporting only for New Zealand business operations or investments (not global businesses or investments)
Note: Significant business operations or investments in New Zealand means at least one of the following applies: At balance date of each of the two preceding periods, total assets of the New Zealand business or New-Zealand-based investment assets exceeds $1 billion In each of the two preceding accounting periods, annual gross revenue for either the New Zealand business or New Zealand-based investment assets exceeds $250 million.

We expect these exemptions for foreign exempt issuers to be issued by the end of calendar year 2023. Foreign exempt issuers whose primary listing is on a non-New Zealand exchange (for e.g., the Australian Securities Exchange (ASX)) with a secondary listing on the New Zealand Stock Exchange (NZX) should consider whether any New Zealand operations or assets will trigger climate reporting for 31 December 2023.

Sustainability reporting in other jurisdictions

Besides New Zealand, Australia, Europe, the United States (USA) and Singapore are just a few of the jurisdictions that have already made sustainability reporting compulsory, or are about to. If you have a company that operates in these countries or are a parent entity with subsidiaries in these countries, please be aware that you may need to prepare sustainability disclosures soon, and as part of this process, measure your greenhouse gas (GHG) emissions.

Australia

In its second Treasury Consultation Paper, the Australian Government proposes that by 2027-2028, all large Australian entities (including large proprietary companies lodging financial reports with the Australian Securities and Investments Commission (ASIC) under Chapter 2M of the Corporations Act 2001) will have to disclose sustainability-related financial disclosures in accordance in the following time-frames:

Group 1 entities – 2024-2045 onwards
Group 2 entities – 2026-2027 onwards
Group 3 entities – 2027-2028 onwards.

Please refer to our Australian firm’s article for more information about the criteria for each group noted above.

Europe

The European Union’s (EU’s) Corporate Sustainability Reporting Directive (CSRD) came into force on 5 January 2023, and EU member states have 18 months to incorporate the CSRD into their national law. For some European entities, climate disclosures will be mandatory as early as next year - 31 December 2024.

What is CSRD?

The CSRD was designed to revise and strengthen the requirements of the Non-Financial Reporting Directive (NFRD). Its scope is much wider than the NFRD, covering more entities, and requiring more disclosures. Entities reporting under the CSRD will have to apply the disclosures contained in EU Sustainability Reporting Standards (ESRS), which includes one overarching disclosure standard, and eleven topical standards. ESRS was adopted by the European Commission on 31 July 2023.

Timeline for CSRD

The timeline for EU entities to report under the CSRD for the first time is shown on the table below.

Type of entity	First reporting year ending
Large public interest entities (listed companies, banks and insurance companies) with more than 500 employees These entities are within the scope of the NFRD	31 December 2024
Listed companies (other than micro listed entities) not within the scope of NFRD	31 December 2025
Large companies/groups meeting two out of the following three criteria and not within the scope of NFRD: More than 250 employees More than €40 million turnover More than €20 million total assets This includes subsidiaries of non-EU groups.	31 December 2025
Listed SMEs Small and non-complex credit institutions and captive insurance undertakings	31 December 2027
A non-EU group which generated more than €150 million turnover in the EU for the last two consecutive financial years and has either: A subsidiary which has securities listed on any regulated EU market Subsidiaries in the EU which meet the threshold for a large company/group as defined above One or more branches in the EU generating more than €40 million turnover.	31 December 2028

What does this mean for New Zealand entities?

Certain New Zealand entities may need to prepare sustainability reports even though they are not scoped into the new Zealand Climate-Related Disclosures (CRD) regime. For example:

A New Zealand subsidiary of a large EU public interest entity will have to prepare sustainability disclosures for 31 December 2024 as part of the group’s consolidated sustainability report
A New Zealand group with a large EU subsidiary will have to prepare sustainability disclosures for that subsidiary at 31 December 2025.

Non-EU groups (including New Zealand groups) that meet the €-turnover threshold in the EU as detailed above will need to report for 31 December 2028 year ends even if there are no equivalent New Zealand requirements.

Unless included in a consolidated group CSRD report, New Zealand entities will have to comply with the ESRS disclosure requirements, which are far more extensive than IFRS S1 and IFRS S2. Additionally, all of the above sustainability information must initially have limited assurance, to be expanded to reasonable (audit) assurance in future.

In our view, introduction of CSRD and ESRS presents an opportunity for forward-looking New Zealand organisations to get on the front foot with their sustainability reporting. Early adoption will allow entities to identify the reporting requirements that align with their current strategy and existing data and begin incrementally implementing reporting metrics. This could not only create a competitive advantage, but also reduce the workload and risks of facing a significant project when these disclosures become mandatory.

USA

The U.S. Securities and Exchange Commission (SEC) has delayed action on finalising a rule requiring public companies (both domestic and foreign registrants) to disclose significantly enhanced climate-related disclosures in registration statements and annual reports (e.g. in Form 10-K or Form 20-F) until October 2023. Proposed financial statement disclosures would be presented in a footnote to the consolidated financial statements, while the other disclosures would be presented in a separately captioned filing prior to the management discussion and analysis (MD&A).

Certain proposed requirements are similar to the disclosure recommendations in the TCFD, which also forms the basis of many of the proposed disclosure requirements in the ISSB’s climate standard IFRS S2.

Timeline for proposals

The table below shows the proposed timeline for SEC registrants to provide climate-related disclosures, as well as required assurance. These rules are likely to apply to most foreign private issuers, so will affect New Zealand entities with this status.

Class of entity	2023	2024	2025	2026	2027
Large accelerated filers	All proposed disclosures, but excluding Scope 3	Scope 3 disclosure Limited assurance		Reasonable assurance
Accelerated filers and non-accelerated filers		All proposed disclosures, but excluding Scope 3	Scope 3 disclosure Limited assurance		Reasonable assurance
Small reporting companies			All proposed disclosures, but exempt from Scope 3

New Zealand entities with or without US operations may have to prepare climate-related disclosures for the SEC, even though there is no equivalent New Zealand requirement. For example, if the proposals are approved, a New Zealand subsidiary of the following types of US filers will have to prepare climate-related disclosures to feed into the US parent’s Form 10-K as follows:

Large accelerated US filer - for 31 December 2023
Accelerated or non-accelerated US filer - for 31 December 2024
Small reporting company – 31 December 2025.

Singapore

In July 2023, the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) launched a public consultation on the recommendations by the Sustainability Reporting Advisory Committee (SRAC) to advance climate reporting in Singapore. The consultation period closes on 30 September 2023.

If finalised, the recommendations would require Singaporean entities to report climate-related disclosures using International Sustainability Standards Board (ISSB) baseline standards as follows:

	Report in accordance with ISSB baseline climate-related disclosure standards (with reliefs)	Report Scope 3 GHG emissions	Obtain external limited assurance over Scope 1 and Scope 2 GHG emissions
	Financial years beginning on or after 1 January
All listed issuers (including those incorporated overseas, business trusts and real estate investment trusts)	2025	2026	2027
Non-listed companies with annual revenue of at least S$1 billion	2027	2029	2029
Non-listed companies with annual revenue of at least S$100 million to less than S$1 billion	A review will be conducted in 2027 with a view to mandating climate disclosures by around 2030

Source: Table 1: Proposed implementation timeline, Turning Climate Ambition into Action in Singapore - Recommendations by the Sustainability Reporting Advisory Committee

New Zealand subsidiaries of Singaporean listed issuers would need to prepare climate-related disclosures to feed into the Singaporean group even though they may not be caught by the New Zealand Climate-Related Disclosures (CRD) regime .

For more on the above, please contact your local BDO representative.