Comment: Mandatory disclosure regimes are rarely designed for convenience, but they are always designed for necessity. New Zealand’s climate-related disclosure (CRD) regime, now through its first year of implementation, is a case in point. While critics may see it as burdensome or bureaucratic, the reality is far more nuanced.
The disclosure rules currently apply to about 200 large financial institutions, known as climate reporting entities (CREs), that are required to report annually on their climate-related activities. This number may drop depending on the outcome of consultation to amend the rules.
The CRD regime should not be seen as requiring a mere checklist exercise. Rather, annual disclosure reports are intended to serve as blueprints for strategic adaptation aimed at achieving decarbonisation targets.
So, how well is it working? Early results tell a story not of failure, but of transition. There are signs the regime is beginning to reshape how institutions think about climate risk, helping shift corporate culture from passive compliance to active strategy.
Still, progress is uneven. This is made crystal clear in a recent report from consultancy Mosiac FSI that examines how insurers, banks, and building societies are complying with CRD requirements relating to climate metrics and targets. In the interests of full disclosure, I collaborated with Mosaic on this research.
The report offers both a snapshot of progress and a cautionary tale. It shows nearly half of the 32 sampled companies are meeting most CRD reporting requirements. However, only four (13 percent) can be considered “front-runners” i.e., entities setting measurable, science-based carbon targets supported by reliable data.
What sets these leaders apart is their access to high-quality data and their ability to translate this data into tangible metrics and performance benchmarks. Indeed, data capability is what allows these companies to treat CRD not as a regulatory hurdle, but as a core pillar of strategic planning.
The report also shows a clear divergence between industries. Banks and building societies consistently outperformed insurers in nearly every climate reporting metric, including reporting on indirect greenhouse gas emissions from their business activities, and assessing climate vulnerabilities and opportunities to mitigate and adapt to climate change.
Banks have an advantage here: through their lending activities, they maintain closer proximity to client operations, which provides access to richer, more granular data. Insurers, in contrast, face a more complex task: they have to navigate fragmented approaches to measuring emissions associated with insurance contracts while trying to obtain emissions data from a diverse and often opaque policyholder base.
Alarmingly, the report found half of the sampled insurers, and a third of banks, have adopted climate targets that either do not support limiting global warming to 1.5°C or require reassessment to consider the company’s emissions reduction potential. In a world already facing destabilisation due to floods, droughts, wildfires, and food system disruptions, soft or poorly aligned targets signal a lack of foresight and carry real financial risk.
Yet there is reason for optimism. Several institutions, particularly those affiliated with the Net-Zero Banking Alliance convened by the UN, are modelling what genuine climate leadership looks like. These front-runners are adopting sector-specific targets grounded in good science, are investing in decarbonisation technologies, and incorporating emissions intensity into their lending and investment decisions. These aren’t cosmetic shifts. They’re market strategies that anticipate and prepare for a future where carbon carries a cost.
Significant obstacles remain, however. Chief among them is accounting for “scope 3 emissions”. These cover indirect carbon emissions that occur in the value chain, such as emissions arising from the end-of-life disposal of a company’s products. Reporting on these emissions is arguably the most challenging. While 84 percent of institutions included some scope 3 disclosures in their reports, 88 percent relied on exemption provisions that allow them to delay reporting on all indirect emissions until 2026.
The quality of disclosure reports is another issue. Reports are often marred either by excessive vagueness or an avalanche of irrelevant detail. The Financial Markets Authority has already highlighted the inconsistent application of materiality principles across reports. And this matters. When everything is deemed material, nothing is. When nothing is clearly material, investor trust erodes and so does the credibility of the entire reporting regime.
The truth is that strong climate disclosure is no longer optional. It’s a form of risk management, capital allocation, and market signalling all at once. Without robust disclosure, markets will misprice risk, capital will flow inefficiently, and stranded assets will multiply. With robust disclosure, we gain visibility, accountability, and the ability to steer through the low-carbon transition with stability rather than volatility.
The CRD regime’s first year offers a mirror. It shows us where we stand but, more importantly, forces us to confront where we need to go. And getting there will require more than incremental steps. It will require a shift in mindset, infrastructure, and regulatory ambition.
Among the most critical steps: acknowledging the evolving nature of climate disclosure standards globally and preparing local institutions for convergence with international frameworks. From the International Sustainability Standards Board’s global baseline to the EU’s Corporate Sustainability Reporting Directive, these shifts will have serious implications for New Zealand entities, especially those with global operations or cross-border capital exposure.
Treating climate-related disclosures as a box to tick is a missed opportunity. Leveraging them as a strategic compass could be the difference between financial fragility and long-term prosperity.
This article was originally published on Newsroom.
Yinka Moses is a senior lecturer in the School of Accounting and Commercial Law at Te Herenga Waka—Victoria University of Wellington.