Overview

On 8 October 2024, the External Reporting Board (XRB) released a consultation document, Proposed 2024 Amendments to Climate and Assurance Standards, proposing to extend transitional relief adoption provisions in the Aotearoa New Zealand Climate Standards (NZ CS) and related assurance requirements. Extensions are proposed for requirements relating to scope 3 greenhouse gas (GHG) emissions, anticipated financial impacts and transitional planning.  

The consultation document is a welcome response to feedback from climate reporting entities (CREs) about the ongoing need for disclosure relief on topics where there are challenges with obtaining reliable data, high costs, and a lack of guidance.  

Key aspects of the consultation

We summarise below the four proposals contained in the consultation document: 

Proposal 1: Delaying mandatory scope 3 GHG emissions disclosure

The XRB is proposing to extend, each by one accounting period, adoption relief under the following adoption provisions relating to scope 3 GHG emissions. 

Adoption Provision	NZ CS Requirement	Proposal
Adoption Provision 4 - Scope 3 GHG emissions	Requirement under paragraph 22(a)(iii) of NZ CS 1 to disclose scope 3 GHG emissions.	Under the revised adoption provision, CREs will not need to report on their scope 3 GHG emissions in their second reporting period.
Adoption Provision 5 - Comparatives for scope 3 GHG emissions	Requirement under paragraph 40 of NZ CS 3 to disclose comparative information for scope 3 emissions for the immediately preceding two accounting periods.	Provided they have relied on adoption provision 4, then under the revised adoption provision 5, CREs will not need to provide comparative information for scope 3 GHG emissions in their second or third reporting periods and will only need to provide one year of comparative information in their fourth reporting period.
Adoption Provision 7 - Analysis of trends (insofar as it relates to scope 3 GHG emissions)	Requirement under paragraph 42 of NZ CS 3 to disclose an analysis of the main trends evident from a comparison of the scope 3 GHG emissions from the previous accounting periods to the current accounting period.	Provided they have relied on adoption provision 4, then under the revised adoption provision 7, CREs will not need to provide an analysis of trends for scope 3 GHG emissions in their second or third reporting periods.

 

Proposal 2: New adoption provision proposed for assurance over scope 3 GHG emissions

For CREs that elect not to delay disclosure under Proposal 1, the XRB is proposing a new adoption provision (Adoption Provision 8) exempting entities from the requirement to obtain an assurance engagement over their scope 3 GHG emissions disclosures for accounting periods ending before 31 December 2025. 

Proposals 3 and 4: Delaying transition planning and anticipated financial impact disclosures

In addition to extending adoption relief for scope 3 GHG emissions disclosures, the XRB is also proposing to extend the availability of adoption relief for transition planning and for anticipated financial impacts disclosures, each by one accounting period.

Adoption Provision	NZ CS Requirement	Proposal
Adoption Provision 2 - Anticipated financial impacts	Requirement in paragraph 15(b) of NZ CS 1 to disclose the anticipated financial impacts of climate-related risks and opportunities that the CRE has identified	Under the revised adoption provision, CREs will not need to disclose the anticipated financial impacts of their climate-related risks and opportunities in their second reporting period.
Adoption Provision 3 - Transition planning	Requirement in paragraphs 16(b) and (c) of NZ CS 1 to disclose information about the transition plan aspects of a CRE’s strategy as well as the extent to which the transition plan aspects of the CRE’s strategy are aligned with its internal capital deployment and funding decision-making processes.	Under the revised adoption provision, entities will not need to undertake transition planning in their second reporting period.

What else is the XRB doing? 

In addition to the proposed amendments set out above, the XRB is also planning a post-implementation review of NZ CS (expected by December 2025) and is planning to release additional guidance in relation to assurance, anticipated financial impacts, and transition planning. XRB is also closely watching the development of disclosure requirements, guidance and practice internationally, particularly Australia and Europe. 

Timing

The XRB has allowed until Wednesday 30 October 2024 for submissions. The XRB’s intention is to implement any necessary changes to the climate reporting regime by the end of this year, in advance of the year two reporting period.  

Next steps

Stakeholders now have the opportunity to provide feedback on the proposed transitional adjustments. With XRB stating that high numbers of CREs who had lodged climate statements by 2 September 2024 relied on the relevant adoption provisions, in particular for disclosures on anticipated financial impacts and transitional planning, we anticipate a high level of support for the proposed extensions.

In addition, we encourage all CREs to review their year one processes and identify any other challenges they faced in reporting and address these early, including by providing feedback to XRB for future consideration. 

Please contact one of our experts if you would like more information about the XRB’s consultation, or for general assistance with climate reporting.

Special thanks to Isabel Van Tuinen for her assistance in writing this article.