New Zealand was the first country in the world to mandate climate-related disclosures through legislation. With the first reporting cycle complete and the second underway, what lessons can we draw from Year 1 — and what should entities focus on for Year 2?
Year 1 in Review
The NZ CS 1-3 standards, issued by the External Reporting Board (XRB), apply to large FMC reporting entities (banks, insurers, credit unions, managed investment schemes above NZ$1bn) and NZX-listed issuers. First disclosures were published in annual reports from early-to-mid 2024.
Key observations from Year 1 reports:
- Scenario analysis quality varied widely: Some entities conducted robust multi-scenario analysis; others produced superficial narratives. The FMA has signalled it will scrutinise scenario analysis rigour
- Scope 3 was the biggest challenge: Many entities disclosed limited Scope 3 data with significant caveats, particularly for financed emissions
- Governance disclosures were strongest: Most entities had existing governance frameworks they could map to NZ CS 1 requirements
- Metrics varied by sector: Banks focused on financed emissions; energy companies on physical risk metrics; insurers on underwriting portfolio exposure
Year 2 Focus Areas
1. Scenario Analysis Depth
The FMA has indicated it expects improvement in scenario analysis quality. Year 2 reports should move beyond qualitative narratives to quantified financial impacts. Use at least two scenarios with clear time horizons (2030, 2050) and document assumptions.
2. Transition Plans
Year 1 reports often described climate strategies without clear transition pathways. Year 2 should include specific targets, milestones, capital allocation commitments, and dependencies. Cross-reference with any voluntary SBTi or net zero commitments.
3. Scope 3 Improvement
Entities should expand Scope 3 category coverage, improve data quality (moving from spend-based to activity-based estimation where possible), and begin supplier engagement programmes.
4. Risk Management Integration
NZ CS 1 requires entities to describe how climate risk processes are integrated with overall risk management. Year 2 should demonstrate genuine integration, not a standalone climate risk register.
5. Cross-Tasman Alignment
For entities also listed on the ASX, Australia’s ASRS standards are now live. Both NZ CS and ASRS are based on ISSB, but differences in scope definitions, transitional relief, and assurance requirements must be mapped. An integrated disclosure approach avoids duplication.
RSustain Advisory
RSustain helps NZ entities strengthen their Year 2 disclosures, improve scenario analysis quality, and manage cross-Tasman interoperability with ASRS. Book a free scoping call.
RSustain UK provides advisory services only. We do not provide statutory assurance or verification.