Updated: April 14, 2021 11:24:19 am
New Zealand is considering a new legislation that would require banks, insurers and asset managers to disclose the impacts of climate change on their businesses, according to CNN.
The bill, said to be the first of its kind in the world, would receive its first reading in the country’s parliament this week. The island nation has been at the forefront of trying to cut down carbon emissions and has pledged to make its public sector carbon neutral by 2025.
Climate Change Minister James Shaw said in a statement, “We simply cannot get to net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate.” He added, “This law will bring climate risks and resilience into the heart of financial and business decision making.”
The legislation would require financial firms to disclose how climate change impacts their businesses and how they will address climate-related risks and opportunities. If the bill passes in parliament, the first disclosure is expected by 2023.
“Requiring the financial sector to disclose the impacts of climate change will help businesses identify the high-emitting activities that pose a risk to their future prosperity,” Shaw said, “as well as the opportunities presented by action on climate change and new low carbon technologies.”
The new bill comes as focus increases on the climate exposure of banks and asset managers to rethink the projects they fund and their climate related implications.
According to CNN, large US banks including JPMorgan Chase, Goldman Sachs and Bank of America, have set up plans to align their financial activities to the Paris climate accord. This would require them to reduce loans and investments to fossil fuel industries such as coal and oil.
According to sustainability non-profit Ceres, the majority of the syndicated loans of major US banks are in economic sectors that have the potential to make them vulnerable to climate change risks.
The European Central Bank said in November that it will begin to assess bank balance statement sheets for climate risks 2022 onwards. Also in November, the US Federal Reserve in their financial stability report addressed the implications of climate change for banks. The report argues that transparency could improve the pricing of climate risks and avoid shocks to the financial market.
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