The FMA has put three documents up for consultation, aimed at helping climate reporting entities (CREs) meet their obligations to publish climate statements on their greenhouse gas emissions, the risks and opportunities imposed on them by climate change and their response.

The watchdog says in the first three years it will initially focus on high-level guidance on compliance expectations, and move to a more proactive regulatory role as the regime becomes more established. In the second year, the FMA will aim to support development of best practice and the third year will aim to be a steady state of guidance, monitoring and enforcement.

It expects a high level of public interest in climate statements, meaning it will need to respond to a high volume of enquiries and complaints and any enforcement action will be considered on a case-by-case basis.

The full set of documents the FMA has released are guidance for keeping proper CRD records, an outline of its CRD monitoring approach for the next three years, and the use of third party providers in CRD.

The proposed guidance for keeping proper climate-related disclosure records provides practical examples for CREs to meet their record keeping requirements under the regime. The record keeping guidance for CREs explains how the FMA will apply the law and describes the principles underlying the FMA’s approach.

It is organised along the four pillars underpinning the requirements each business must report itself against which include the role of their governing body and senior management, a risk management pillar on how they identify, assess and manage climate-related risk, a strategy pillar on how climate change is currently affecting them and how it might do in the future, and a metrics and targets pillar for measuring climate risk and opportunities, and GHG emissions.

CRD manager for the FMA Jenika Phipps, says the FMA accepts that the climate reporting regime is new, and the market’s ability to manage data sources and systems for collecting and reporting on climate-related information will improve over time.

The proposed guidance is open for consultation until 4 August.

The CRD regime will capture around 200 entities, with market cap over $60 million; registered banks, credit unions and building societies with total assets over $1 billion; licensed insurers with total assets over $1 billion or annual gross premium revenue over $250m; and  managers of registered schemes, such as Kiwisaver and investment funds, with greater than $1 billion in total assets under management.

The CRD legislation amends the Financial Markets Conduct Act 2013 (the FMC Act), the Financial Reporting Act 2013 and the Public Audit Act 2001 and inserts a new Part 7A to the FMC Act. 

Under the legislation, CREs will be required to prepare an annual climate statement in accordance with the climate standards issued by the External Reporting Board (XRB), get independent assurance about the part of the climate statement that relates to the disclosure of greenhouse gas emissions, make the climate statement available to the public and comply with record-keeping requirements.