New Zealand Financial Markets Authority - Climate-Related Disclosures: Insights From Our Reviews 2025

Insights

From our recent reviews1 we had broadly the same insights that were raised in our 2024 Insights Report. We encourage all CREs to consider those that are relevant to them, to improve their disclosures for their next reporting period.

There was a wide spectrum of quality of climate statements, from high quality with minimal review findings to those where we found multiple areas for improvement. Some examples from the first year of reviews where areas of disclosure contributed to higher-quality reporting included:

• presenting information in an understandable format to help primary users understand complex areas or concepts, e.g. through use of tables, titles or sections;
• providing clear organisational structures to help describe where both governance- and management- level positions and committees lie;
• clearly describing whether and how processes for identifying, assessing and managing climate-related risks are integrated into the overall risk management process;
• effective use of appendices, especially for additional information not required by the Climate Standards (e.g. case studies, detailed sector analysis, detailed physical hazard or risk analysis, and other wider sustainability-related information);
• transparent disclosures related to greenhouse gas emissions targets, including the scope of the gross greenhouse gas emissions covered, the extent to which the target relies on offsets (e.g. %), time period covered, and other relevant contextual information.

Climate-related risks and opportunities disclosures

We have set out a new focus area on the effectiveness of CREs’ identification and assessment processes for climate-related risks and opportunities (CRROs). As Diagram 1 below explains, these are central to the CRD reporting framework and a vital part of ensuring value is obtained from the CRD regime. We expect CREs to evaluate the effectiveness of these processes to ensure they result in disclosure of material information.

From our monitoring reviews we found disclosures that may indicate insufficient or incomplete identification and/or assessment of climate-related risks and opportunities.

We have set out our insights below to help CREs identify areas for improvement that could be relevant to them. These include:

• disclosures that were not specific:
  • to the risk, with no contextual information to describe factors such as severity, frequency, exposure and vulnerability;
  • to the opportunity, instead describing sector- or economy-level driving forces such as changes in the legal environment or consumer preferences, with no contextual information to describe more specific attributes of the opportunity;
  • to the entity, instead appearing to relate to sectors or industry but not explaining why they were relevant to the entity and its operations, value creation, strategy, supply chain or assets.
• disclosures that omitted or obscured material information, including:
  • disclosing a large number of climate-related risks and opportunities that may have included immaterial risks, thereby obscuring or excluding those that were material;
  • disclosures that focused on risks that did not appear relevant to the industry or type of entity;
  • omitting the relevant time horizons (i.e. short, medium or long term) for the CRROs that had been identified;
  • information being provided about the criteria used for a risk and opportunity assessment (e.g. ranking or colour codes) without including any further details for primary users to understand this assessment;
  • disclosing a current impact (e.g. an impact from a severe weather event like Cyclone Gabrielle) that did not have an associated climate-related risk identified (e.g. risk of a cyclone impacting assets) or an explanation as to why it was not considered a risk;
  • identification of physical risks using only climate models’ averages, instead of multiple potential outcomes. Using averages could minimise material risks (e.g. the range of potential outcomes of a scenario can range between more rainfall and less rainfall; if the average is slightly more rainfall, then the risk of chronic drought can be missed).

Further observations to improve climate-related risk and opportunity identification and assessment

• CREs should consider which risk and opportunity identification and assessment tools, methods and models2 are most relevant and effective for them.
  • We note that for first-year climate statements, CREs generally made a good effort to undertake scenario analysis3 (which was a new tool for most), but good practice is still developing.
  • CREs should consider whether their scenario analysis process sufficiently captures risks and opportunities or whether further data or analysis may also be necessary.
• We encourage CREs to understand the data and limitations of any tools, methods and models used, including whether they are fit for purpose.

1 Relating to reporting periods ending between 30 June and 30 November 2024.

2 An overview of those supplementary tools and processes is available on p.59 of the XRB’s Climate-related Disclosures Guidance for All Sectors (2023) | xrb.govt.nz

3 Refer to the scenario analysis insights on page 19 of our Insights Report.