What we’re doing to help improve climate change reporting

Standards, laws, and regulations play an important role in supporting credible and transparent reporting about climate change. Amy Hamilton describes how we’re actively providing submissions on draft standards, laws, and regulations to try to get really good reporting for New Zealanders.

Climate change The Auditor-General has an expectation for public organisations that their emissions information is measured and reported clearly, and that the reported information is credible, comparable, transparent, as well as understandable.

We all know that climate change is one of the most significant issues facing Aotearoa New Zealand and the world – but can we trust and do we understand the information that’s reported?

Standards, laws, and regulations play an integral role in supporting the quality of what’s reported. It’s why our climate project team has provided submissions on several related consultation documents during the last year.

We’ve provided submissions on domestic reporting and assurance standards and a consultation paper on domestic regulations. But we’ve also sent submissions to international bodies, such as our submission to the International Public Sector Accounting Standards Board on a consultation paper about advancing public sector sustainability reporting.

Here’s what we’ve been working on domestically.

Submitting on setting up a framework for climate reporting and assurance in Aotearoa

The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 gave the External Reporting Board (the XRB) responsibility for preparing and issuing the climate-related disclosure framework and related assurance standard.

The Aotearoa New Zealand Climate Standards (Climate Standards) apply to a subset of organisations called Climate Reporting Entities. These entities are required to prepare Climate Statements, under the Financial Markets Conduct Act 2013.

Due to the speed at which the Climate Standards needed to be prepared, the XRB took a three-step approach to consulting on these standards. We provided a submission at each stage of this consultation process. Our submissions are on the XRB website:

The XRB issued final versions of the Aotearoa New Zealand Climate Standards in December 2022. These Climate Standards are in three separate documents.

Given the importance of the information being reported, the GHG emissions disclosures will be of interest to the public. It’s therefore critical that the Climate Standards are fit for purpose. In our submissions to the XRB on the Climate Standards, we highlighted that the proposed drafts were for-profit focused.

It is important that these standards are also appropriate for public organisations. Considering the information needs of the stakeholders of public organisations, our submissions proposed some changes to the Climate Standards. Our key concerns were about:

the definition of “primary users”, which was restricted to a narrow group (the investors, lenders, and creditors); and
defining materiality for the disclosure of climate-related information in terms of “enterprise value”, a concept that’s not particularly relevant to public organisations.

Once the Climate Standards were issued, the XRB issued a consultation document and exposure draft on assurance engagements over greenhouse gas (GHG) emissions disclosures (GHG Assurance Standard) in December 2022. We provided a submission on this, too.

The proposed GHG Assurance Standard will play a significant role in supporting high-quality assurance engagements. Therefore, the standard needs to set quality management and ethical requirements at a high level. We recommended that the XRB consider enhancing or providing further guidance on the requirements for these matters.

Submitting on climate-related laws and regulations

In November 2022, the Ministry of Business, Innovation and Employment (MBIE) released a consultation document, Assurance over climate-related disclosures: occupational regulation and expanding the scope of assurance. The submission period closed in February 2023.

Through this consultation document, MBIE and the Ministry for the Environment were seeking feedback on:

whether an occupational licensing regime for the individuals assuring the climate statements should be introduced; and
whether to extend the scope of the assurance requirement, from the current obligation to assure only greenhouse gas emissions disclosures to assurance over all disclosures in the climate statement.

In our submission, we agreed with MBIE’s proposal for direct licensing, registration, and monitoring of CRD assurance practitioners by the Financial Markets Authority. We had concerns about the status quo (no regulation of assurance providers) and the option of a co-regulatory model under the Auditor Regulation Act. We noted that the status quo is not viable or appropriate from a trust, confidence, and quality perspective. Also, we don’t consider the co-regulatory approach to be viable because there aren’t any obvious professional bodies to regulate the people who provide assurance over climate-related disclosures.

We’re still awaiting the outcome of the consultation process.