Climate change brings trillions of dollars in risk to businesses
Forget Covid-19, climate change brings trillions of dollars worth of risk to the global economy, and New Zealand is not immune, international experts are saying. And those Kiwi companies need to start disclosing that risk and its possible impacts. Addressing a New Zealand audience of 2000 on a zoom call on Thursday, United Nations Special Envoy for Climate Action and Finance Mark Carney, with Reserve Bank governor Adrian Orr and Minister for climate change James Shaw, said greater transparency was needed. "We need a whole economy transition, that [Carbon] zero will not be achieved in the niche ... that's one of the reasons we need comprehensive disclosure," Carney said. READ MORE: * Why carbon emission reporting is important for your retirement wallet * Adrian Orr: Economic shockwaves will eventually give way to vibrant, refreshed New Zealand economy * Real estate responsible for 40 per cent of global carbon dioxide emissions: Report "Markets require information to operate effectively - what gets measured gets managed." Since the Covid-19 disruption the world's economic drives have shifted, and climate change needed to take priority, he said. The Government is currently reviewing consultation on mandatory climate-related risk reporting. The Ministry for the Environment's discussion document sets out proposals for a mandatory, principles-based and climate-related financial disclosures regime. Consultation ran from October to December last year. Shaw said there were trillions of dollars of unquantified, undisclosed and unmanaged risk sitting on corporate balance sheets around the world due to risks of climate change. "I am really delighted that we're in a position now where we're able to consider putting in place a mandatory climate-related risk disclosure system for New Zealand." New Zealand's economy was as exposed as any other developed country when it came to financial risks caused by climate change, he said. "We're currently going through another one-in-seventy-year drought up on the East Cape of New Zealand, and that is roughly the fourth time in the last 10 years that we've had one-in-seventy-year drought," Shaw said. "We are feeling the effects, and those do have a material impact on businesses." Shaw said the "great majority" of large companies do not provide any information, disclosed only small amounts of information, or were reporting in an ad hoc way, he said. "This situation needs to change. It is clear that climate change factors can pose serious risks for companies and investors." Results from the consultation were received in late February, Shaw said. Eighty-four per cent of the respondents agreed that the Task Force on Climate-related Financial Disclosures (TCFD) framework was appropriate for New Zealand, an "astonishingly high" number, he said. Seventy-seven per cent supported large investors and listed companies to make disclosures. The Government would hopefully move to making policy decisions later this year, Shaw said. "I was really delighted with the level of support that we had for the proposals." Reserve Bank governor Adrian Orr said New Zealand was "playing catch up" when it came to the reporting of climate risks. "There's scant evidence of that [climate] concern changing business decisions. "Part of that might be because disclosure and the awareness of climate change is pretty thin. "Two-thirds of the banks we surveyed had some form of disclosure on climate change risks." Disclosure would be an important instrument to manage climate risks, and also encourage investment in a low-emissions economy, he said. "[It would] greatly assist Aotearoas transition to a low-carbon future." The Reserve Bank was already putting climate change at the forefront of its decisions, Orr said. In January 2020, Carney was appointed by the UK Prime Minister to be the finance advisor at the COP26 conference. Carney is also the former Governor of the Bank of England.