60% of NZX50 companies are disclosing climate-related risks in their financial statements, a study by Chartered Accountants Australia and New Zealand indicates.
This represents an increase from the past year, when only 40% of NZX50 companies considered these risks in their financial reporting.
Only slightly more than a third of the 200 Australian ASX-listed companies disclosed climate-related risks. Australia trailed behind New Zealand in implementing legislation mandating climate risk disclosures.
The study has also revealed that globally, the proportion of companies incorporating climate risks into their financial statements has risen from 18% in 2021 to 38% in 2024.
Companies reported that climate risks most commonly affected their financial statements through the impairment of asset values (41% of mentions) and the assessment of assets’ long-term useful life (22% of mentions).
While power companies were the most inclined to consider climate risks when preparing their financial statements, consumer discretionary product manufacturers, such as cosmetic producers, were the least likely to do so, with only 9% reporting that they had taken climate-related risks into account during this process.
New Zealand has led the way in requiring large corporations to disclose climate-related financial information. Following a legislative change in 2021, approximately 200 major financial institutions and publicly listed companies are now obliged to provide annual reports on their climate-related activities.
This legislative change aims to enhance transparency and accountability concerning climate risks. It aligns with global sustainability efforts and helps ensure that businesses incorporate climate considerations into their financial decision-making processes.
Focus on Compliance Over Action
Just recently, the government considered easing the climate disclosure rules, mainly due to concerns about high compliance costs. A discussion document from the Ministry of Business, Innovation and Employment highlighted that the current regulations are seen as too costly and may lead companies to focus more on compliance than on developing their ability to address climate change.
Among the options presented in the discussion document, one of the most notable proposals involves increasing the reporting threshold to require only companies with a market value of $550 million to disclose their climate risks.
Currently, the threshold is set at $60 million. This change would reduce the number of companies required to report, from the current level to just 54.