A first from New Zealand: Banks now have to disclose impact on ‘climate change’

With the law passed by the New Zealand government, banks and financial institutions in the country have made it compulsory to explain “how much they affect climate change and global warming” with their investments and loans.

With the law passed on Thursday last week, New Zealand became the first country to make the relationship between environmental issues and the banking system transparent.

Accordingly, every bank, financial institution or insurance company operating in the country with a cash or real estate value of at least 620 million euros (New Zealand dollar 1 billion), domestic and foreign, will have to comply with the new law.

The law covers 200 financial institutions, including the 4 largest banks in Australia and New Zealand, the Commonwealth Bank of Australia, Australia and New Zealand Banking Group, Westpac Corp and the National Bank of Australia.

Green Party leader and New Zealand Minister of Climate Change, James Shaw, stated that his country is the world leader in sensitivity to global warming and climate crisis issues, and that the law in question is essential for the Wellington government to reach zero emissions for the entire public sector by 2025.

“New Zealand is the world leader in this area. We are leading other countries to disclose some climate information,” Shaw said. said.

The Wellington government had been working on the law since April 2021. The country’s long-term goal is to reach a “zero emissions” rate by 2050, as set out in the Paris Climate Agreement.

Ministry of Climate Change awarded to Green Party leader Shaw

In the general elections held on 17 October 2020 in New Zealand, the Labor Party, led by Prime Minister Jacinda Ardern, came to power alone with 49 percent of the votes. The Ardern government signed a cooperation agreement with its former coalition partner, the Green Party.

Under the agreement, the Greens co-leaders James Shaw and Marama Davidson were nominated from outside the cabinet to serve as the “Climate Change and Domestic Violence” ministries, respectively.

After taking office, the government declared a “global warming” emergency, promising to step up its efforts on the climate crisis.

All public vehicles to be purchased after 2025 will be electric or hydrogen

New laws require financial companies to disclose their climate and environmental impacts through the investments and loans they make. These loans and investments must comply with the norms of the country’s independent accounting body, the External Reporting Board (XRB).

XRB’s rules are based on the Climate-Related Financial Statements (TCFD) Working Group. The law in question will cover the fiscal years after 2023.

New Zealand wants to reduce its utilities to “0 emissions” by 2025. In addition, after 2025, all buses, trains and other vehicles to be purchased to municipalities and state companies will be electric or hydrogen.

First step from G-7 countries and Switzerland

While New Zealand was the first country to impose a “disclosure on climate change impact” obligation on financial companies, some governments, particularly in Europe, have taken similar decisions before.

The G-7 countries (France, England, USA, Italy, Germany, Japan, Canada), which make up 64 percent of the global wealth in the world, were informed about the climate-related risks of banks in their financial relations and services within the scope of the Climate-Related Financial Statements Task Force (TCFD) draft last June. made the declaration mandatory. These countries were later joined by Switzerland.

Among these countries, France was the first to make the TCFD rules officially mandatory for banks in 2021 and instructed these financial institutions to update their emission targets every 5 years.

Switzerland, on the other hand, has mandated a similar bill to banks, insurance and other financial companies with more than 500 employees and a capital of at least 18.7 million euro (20 million Swiss francs), and announced that it will come into force after 2022.

What activities do financial institutions do? Comprehensive step from Islamic bank

London-based Gatehouse Bank recently announced that it will voluntarily act with the goal of “zero emissions” in all its operations.

The bank, which has a capital of 1.2 billion pounds and 102 employees, became operational in 2008 and serves according to the Islamic religious principles (sharia). Gatehouse Bank also noted that it will reduce business trips and support the company’s headquarters with renewable energy systems.

Charles Haresnape, Chief Executive Officer (CEO) of the bank, said in a statement on the subject, “We know that our greatest impact on nature is linked to the activity we finance. Therefore, achieving zero emissions in all our business relationships is the first step for us. Investments that have previously been financed and cause emissions. There are also climate targets for our bank. Such initiatives are at the center of our bank’s ethical line.” he said.

SBFN encourages banks to invest in ‘sustainable sectors’

It is a very big step for the countries of the world to shift their financial investments to sustainable ones in reducing the impact on the climate to reach the zero emission target.

Established in this context, the Sustainable Banking and Finance Network (SBFN) provides services voluntarily in order to attract the financial sector to sustainable investments.

SBFN encourages banks to adopt sustainable practices to ensure financial investments are in climate-friendly and socially inclusive areas.

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