Climate-related risks
This page provides information on the Climate-related risks priority theme.
CoFR and climate change
Climate change has far-reaching implications for New Zealand’s economy and financial stability, making it a top priority for CoFR. Climate-related risks are a direct challenge to the financial system as the risks are significant but can be difficult to identify, price, allocate and manage with accuracy.
The function of the council is to facilitate co-operation and co-ordination between members of the council to support effective and responsive regulation of the financial system in New Zealand.
While it is the Government’s role to select overall policy responses to climate change and drive the transition to a low-carbon economy, it is critical CoFR agencies work closely together to help the financial sector adapt for and mitigate climate change.
CoFR agencies and the climate community
What do we do?
New Zealand’s financial regulators and other members of CoFR’s climate community coordinate on climate-related initiatives within the regulators’ legislative and regulatory mandates.
New Zealand’s financial regulators work together to build capability, share expertise and knowledge around climate-related regulation.
CoFR members make relevant connections with domestic and global fora and organisations to ensure NZ is aligned with global regulatory development in the financial system, relating to climate change.
In addition to this, CoFR’s climate community works towards ensuring that the level of regulation is appropriate and supports New Zealand’s transition to a low-emissions climate-resilient economy. The wider CoFR community publishes and maintains a Regulatory Initiatives Calendar, which includes industry consultations, reviews and legislative updates. We update this calendar every quarter.
Regulatory Initiatives Calendar
Financial Markets Authority
The Financial Markets Authority (FMA)’s statutory objective is to promote and facilitate the development of fair, efficient, and transparent markets. It is responsible for independent monitoring and enforcement of the new Climate-related Disclosures regime, providing guidance about compliance expectations, and reporting on monitoring activities and findings.
The FMA is taking a broadly educative and constructive approach to the new regime, issuing high level guidance on compliance expectations, then moving to a proactive regulatory role as the regime becomes more established.
The FMA also regulates the disclosures of integrated financial products (IFPs), which include non-financial factors such as natural, social or human capitals features.
Its role is also to require fund managers and other market participants to ensure they provide accurate information. If a fund is claiming green or sustainable credentials, that claim must come with sufficient detail to articulate and substantiate that story.
Read more on Climate-related disclosures
Read more on ethical finance (for industry)
Read more on ethical investing (for consumers)
Reserve Bank of New Zealand
Understanding and incorporating the impact of climate change is critical to the Reserve Bank of New Zealand (RBNZ) in carrying out many of its core functions. These include as a prudential regulator and supervisor under prudential legislation.
Since RBNZ published its climate strategy in 2018, it has focused attention on incorporating climate change into its role as a prudential regulator and supervisor in three main areas: climate-related scenario analysis and stress testing, embedding climate change into its supervisory approach, and developing guidance for regulated entities on managing climate-related risks.
In addition to working with the other CoFR members and key domestic stakeholders, RBNZ engages extensively internationally including by actively participating in the Central Banks and Supervisors Network for Greening the Financial System (NGFS).
Read more on RBNZ’s climate-related work as a prudential regulator and supervisor
Read more on RBNZ’s 2021 Climate Changed report
Commerce Commission
The Commerce Commission is an independent competition, fair trading, consumer credit and economic regulator. It seeks to ensure markets work well and consumers and businesses are confident market participants. The Commission’s focus is on making New Zealanders better off – protecting the long-term interests of consumers. They play a role in ensuring New Zealand’s markets are competitive, and sectors with little or no competition are appropriately regulated. The Commission prioritises its limited enforcement resources to focus on matters where the greatest harm exists or may occur. The Commission also tries to respond promptly to changing or emerging market problems, so will focus on making timely responses to problems as they arise.
The Commission carries out a range of work related to climate issues and in many areas their role involves providing expert regulatory or competition input into climate/ emissions reduction response plans, with more specific roles in relation to regulated infrastructure’s plans for decarbonisation.
Examples of recent work include:
- Publishing Environmental Claims Guidelines to help businesses understand their obligations when making environmental claims, including how to avoid breaching the Fair Trading Act.
- Publishing Collaboration and Sustainability Guidelines to assist businesses to understand when collaboration with competitors for sustainability objectives may raise competition issues under the Commerce Act, and steps businesses can take to comply with the law.
Ministry of Business, Innovation and Employment
MBIE and the Ministry for the Environment (MfE) assisted in the development of the policy proposals for the new Climate-related Disclosures regime introduced in the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021. Since the introduction of the Act, MBIE and MfE have consulted on expanding the assurance requirement in the disclosure regime.
MBIE has also been working on the development of regulations to assist in the implementation of the regime.
The Treasury
The Treasury is the Government’s lead economic and financial adviser and steward of the public sector financial management and regulatory systems. Climate change is an area of strategic focus for the Treasury because of the likely wide-ranging implications it will have for New Zealand’s economy and society. In keeping with their stewardship role, the Treasury is involved in a range of work related to the economic, regulatory and fiscal implications of climate change and how New Zealand can navigate these challenges effectively in the future.
Read more on The Treasury New Zealand's work on Climate Change
CoFR Partners
In addition to the five member agencies of CoFR, the CoFR Climate community invites the Ministry for the Environment and the External Reporting Board as partners, given the significant work they are involved in about climate change.
Ministry for the Environment
The Ministry for the Environment (MfE) is the Government’s primary adviser on environmental matters. The MfE also has a stewardship role, which involves taking a long-term perspective on environmental issues when making decisions.
Climate Change | Ministry for the Environment
The External Reporting Board (XRB)
The External Reporting Board is an independent Crown entity that develops and issues reporting standards on accounting, audit and assurance, and climate, for entities across the private, public, and not-for profit sectors. It issued Aotearoa New Zealand Climate Standards (NZ CS) in December 2022 and continues to maintain an active work programme of guidance development and other support for entities applying NZ CS.
Aotearoa New Zealand Climate Standards | XRB
Climate Activities
Each CoFR agency is responsible for a variety of climate change-related work programmes. We have produced a diagram depicting the climate change-related work programmes of the respective CoFR agencies and their partners. Some of these work programmes are captured in New Zealand’s Emissions Reduction Plan (ERP) and National Adaptation Plan (NAP).