Sustainability and

climate reporting
Massey University

1 May 2024
Contents/agenda slide

1. What is sustainability reporting?

2. Climate change reporting in New Zealand

3. Interactions with the rest of the business

Matthew Cowie
Partner, Climate Change and Sustainability Services

Page 2 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
What does Climate Change and Sustainability Services (CCaSS) do?

Climate Change Sustainability Environment, health Community impact

• Support clients on the • Support clients as they and safety • Design, develop and help
journey to a zero-carbon seek to integrate ESG • Support clients as they implement large-scale
future as they seek to and sustainability into seek to optimise behaviour change,
identify climate risks and business strategy and environmental, health education and
opportunities, develop improve and and safety (EHS) community programs,
net-zero strategies and communicate their effectiveness and make and evaluate the
communicate environmental, social strategic and operational outcomes and impact of
performance to and governance (ESG) decisions that can help programs designed to
stakeholders. and sustainability drive effective drive social benefit.
performance to productivity outcomes
stakeholders. and culture.

Wide range of technical, BD and branding support to EY teams across multiple SLs

Page 3 24 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
What is sustainability
reporting?
Reporting and corporate action

Leadership Compliance
Reporting focused focused Greenwashing

Corporate action

Even though your organisation

might not be captured, your bank,
your insurance company, your
investors, your stakeholders and
your customers might be.

And your staff will care as well.

Page 5 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Potential corporate reporting objectives

Ensure Improve
Gain better Identify practical
compliance Identify areas for reporting
scores in steps to elevate
with standards. improvement. performance vs
investor surveys. communications.
peers.

Waterline

Make your
Understand Identify key risks
organisation’s
future and opportunities
strategy more
sustainability from
sustainability-
drivers. sustainability.
resilient.

Page 6 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
 Global view of sustainability reporting around the world
Certain jurisdictions are moving ahead with regional mandates and sustainability reporting directives

Canada: The CSSB and Illinois: A new Act (HB 4268) New York: Proposed new UK: Mandating TCFD-aligned Japan: FSA introduced new, high-level ESG
CSA have publicly will require companies to bill (SB S77051) requiring disclosures by 2025, many disclosure requirements for all Japanese
welcomed the ISSB disclose and verify scope 1, 2 reporting and verification requirements in place by 2023. listed companies in March 2023. SSBJ is
standards. The CSSB and 3 GHG emissions to the of scope 1, 2 and 3 GHG developing more prescriptive sustainability
expects to release an emissions registry, starting 1 emissions. disclosure standards aligned with ISSB.
Exposure Draft in March January 2025.
2024 and finalise in Q3
2024.

Canada UK
California: Passed two bills (SB 253
and SB 261) providing disclosure EU
Japan
requirements for all companies US
operating in California, including Hong Kong Hong Kong: Revised ESG listing
those established outside the state. A rules with new disclosure
third bill (AB 1305) requires requirements on climate-
disclosures from companies selling related risk, now in effect.
voluntary carbon offsets, and
companies purchasing voluntary US SEC: Expected to Brazil
carbon offsets and making net-zero release a final climate
or carbon neutral claims. change-related disclosure
standard and a draft
AASB: Australian Accounting Standards Board human capital Australia New Zealand
CSA: Canadian Securities Administrators management disclosure EU: CSRD will replace
CSSB: Canadian Sustainability Standards Board standard. NFRD, effective January
CSRD: Corporate Sustainability Reporting Directive Australia: The AASB released
2024 (phase in), requiring New Zealand: Mandatory
ESRS: European Sustainability Reporting Standards Exposure Draft ED SR1 to propose
EU: European Union wide range of ESG disclosures of climate-related
Brazil: The first country to climate-related financial disclosures,
FSA: Financial Services Agency disclosures (for EU & risks for companies and
GHG: Greenhouse gas adopt the ISSB IFRS S1 and open for comments until March 2024.
foreign companies). financial institutions, now in
ISSB: International Sustainability Standards Board S2 standards. Moving from The Australian Treasury issued the
NFRD: Non-Financial Reporting Directive voluntary use starting in Climate-related financial draft effect.
SEC: Securities and Exchange Commission legislation consultation until 9
2024 to mandatory use on 1
SSBJ: Accounting Standards Board of Japan
TCFD: Task Force on Climate-Related Financial Disclosures January 2026. February 2024.

Page 7 30 April 2024 Sustainability and climate reporting Note: This map highlights some examples of sustainability reporting regimes in relevant markets but is not exhaustive
© 2024 Ernst & Young, New Zealand. All Rights Reserved. and is subject to change.
 Reporting standards and regimes

Taskforce for Climate-Related Financial Disclosures (TCFD)

International
standards
International Sustainability Standards Board (ISSB)
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
IFRS S2 Climate-related Disclosures

Australian European
New Zealand
Sustainability Sustainability UK climate California Climate
Regional/ Climate
Reporting Reporting disclosures Disclosures
national Disclosures
Standards Standards (UK CRD) (CA CRD)
regimes (NZ CS)
(ASRS) (ESRS)

The relationship between the regional schemes and TCFD or ISSB is evolving

Page 8 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
The core elements of sustainability reporting

Governance The governance processes, controls and procedures an

entity uses to monitor, manage and oversee sustainability-
Strategy related risks and opportunities

Risk
An entity's strategy for managing sustainability-related
Management
risks and opportunities

The processes the entity uses to identify, assess, prioritise

and monitor sustainability-related risks and opportunities
Metrics and An entity’s performance in relation to its sustainability-
Targets related risks and opportunities

The core elements of the IFRS Sustainability

Disclosure Standards

Source: IFRS Foundation. Webinar on the ISSB’s exposure drafts, April 2022

Page 9 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Emerging structure of sustainability reporting

Climate Biodiversity

General requirements
for all disclosures +
Supply chain Communities

Page 10 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
The structure of ISSB

Governance General Requirements Standard

(e.g., IFRS S1)
Strategy

Risk
Management

Topic-based cross- industry

Topic-based industry-
requirements (e.g., IFRS S2,
specific requirements
with more expected in the
(expected in the future)
Metrics and future)
Targets

The core elements of the IFRS Sustainability

Disclosure Standards

Source: IFRS Foundation. Webinar on the ISSB’s exposure drafts, April 2022

Page 11 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
EU Corporate Sustainability Reporting Directive (CSRD)

Level 1 – Corporate Sustainability Level 2 – European Sustainability Reporting Standards (ESRS)

Reporting Directive (CSRD)
Cross-cutting Topical sector-agnostic Sector-specific

Standards under
development
scheduled for
June 2024,
but postponed

Entity-specific

Embedded in
ESRS:
Entity-specific
topics to be
disclosed

Climate disclosures are just the

Plastic packaging
start of the sustainability CBAM Sugar taxes …and more
taxes
regulations that are coming

Source: EFRAG, First Set of draft ESRS - EFRAG

Page 12 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Climate change reporting
in New Zealand
Climate disclosures in Aotearoa New Zealand

Climate reporting entities are required to make climate-related disclosures in accordance with Aotearoa New Zealand Climate Standards.

► NZ CS 1 Climate-related Disclosures specifies:

► The climate-related disclosure requirements for the thematic areas of governance, strategy, risk
management and metrics and targets
► The assurance requirements for greenhouse gas emissions disclosures

► NZ CS 2 Adoption of Aotearoa New Zealand Climate Standards

specifies optional transitional relief

► NZ CS 3 General Requirements for Climate-related Disclosures

specifies the principles, underlying concepts (e.g., materiality)
and general requirements for preparing and disclosing climate-
related information

The Standards are effective for annual reporting

periods beginning on or after 1 January 2023.

For example, for climate reporting entities with 31

March year ends, the first year of reporting in
accordance with the Standards will be 31 March 2024.
.

Page 14 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Who must disclose

The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 establishes a climate-related disclosure
framework for New Zealand and makes climate-related disclosures mandatory for climate reporting entities.

Climate reporting entities (CREs) are:

Registered banks, credit

Managers of registered
Listed issuers unions, Licenced insurers
investment schemes
building societies

Total Total face

market value of Annual gross
Total
value of or quoted debt or premium Total assets under management
Total assets assets
equity securities revenue (AUM)
> $1 billion >$1
securities > $250 > $1 billion
billion
million
> $60 million

CREs do not include: CREs do include:

► Listed issuers that have securities quoted only on growth markets ► Overseas incorporated organisations if their New Zealand business
meets any of the above requirements
► Entities with no quoted securities

Page 15 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
NZ CS 1

To provide information about the climate-related risks and climate-related opportunities that climate change presents for its activities
over the short, medium and long term, an entity must disclose:

Governance Risk management

► The identity of the governance body responsible for oversight of ► A description of its processes for identifying, assessing and managing
climate-related risks and opportunities climate-related risks
► A description of the governance body’s oversight of climate-related ► A description of how its processes for identifying, assessing, and
risks and opportunities managing climate-related risks are integrated into its overall risk
management processes
► A description of management’s role in assessing and managing climate-
related risks and opportunities

Strategy Metrics and targets

► A description of its current climate-related impacts ► The metrics that are relevant to all entities regardless of industry and
► A description of the scenario analysis it has undertaken business model
► A description of the climate-related risks and opportunities it has ► Industry-based metrics relevant to its industry or business model used
identified over the short, medium, and long term to measure and manage climate-related risks and opportunities
► A description of the anticipated impacts of climate-related risks and ► Any other key performance indicators used to measure and manage
opportunities climate-related risks and opportunities
► A description of how it will position itself as the global and domestic ► The targets used to manage climate-related risks and opportunities,
economy transitions towards a low-emissions, climate-resilient future and performance against those targets
state

Page 16 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Interactions with the rest of
the business
Convergence of corporate and sustainability strategy

Corporate Climate Corporate Climate Corporate (& Climate)

strategy strategy strategy strategy strategy

Organisations need to undertake this

strategic transformation

Page 18 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Reporting and corporate action

Compliance monitoring
External assurance
Stakeholder communication
Reporting
Corporate action

Risk management controls

Strategic decision-making
Robust evidence base
Record-keeping
Governance oversight
Internal assurance

Page 19 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Climate disclosure records must:

Be
maintained Be available
Be readily
identifiable and within an in an
comprehensible effective electronic
system of Comply with format
controls the CRE’s
Provide evidence
legal
of materiality
obligations if
considerations
kept by a
Have
Be kept in third party
appropriate Record-keeping is
English or te protection viewed as critical
reo Māori and because the
safeguards Be available process is so
promptly central to the
(notionally disclosure regime
five working
days)

Page 20 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
Implications for business leadership

The XRB and the FMA have made it clear that both
“the how” and “the what” are crucially important

Climate disclosure process Climate disclosure statement

• Company Directors are responsible/liable for climate disclosures, just as they are for
financial statements
• Not just for external consultants and auditors, the processes must be internal
• Internal knowledge- and capacity-building exercises are important
• The structure of your organisation needs to be considered
• Judgements about materiality are critical and must be recorded
• Internal controls are a crucial part of the disclosure regime

Page 21 30 April 2024 Sustainability and climate reporting

© 2024 Ernst & Young, New Zealand. All Rights Reserved.
 Nature comes next

Financial institutions with

100+ world leaders promised to

connection end and reverse

US $8.7tn
deforestation
the
e.g. Colombia’s Supreme Court
with climate change and nature loss has committed to end investment in recognised Colombian Amazon as an
become clear deforestation-linked activities entity that has rights – entitled to
at COP26 in 2022
protection, maintenance and
restoration by the state.
Regulatory 75% of global trade
responses in key commodities that threaten
to protect biodiversity forests (e.g. soya, palm oil and cocoa)
pledged to
► US FOREST and SAFE Acts
► UK’s Environment Bill
halt forest loss
► France’s Energy-Climate law
► EU’s framework for sustainable
in supply chains
investment
► Australia’s ‘Nature Repair

3
Market’ WEF’s 2022 The EU’s new Deforestation
► EU Deforestation Regulation “The Global Risks Regulation requires companies
► New Zealand biodiversity credit Report” to conduct due diligence on the

of
system value chain to ensure the goods
do not result from deforestation.

COP15 top

UN’s first Convention

on Biodiversity
95 high profile companies in
the UK commit to being
10 Most severe global risks
are nature-related risks

increasing global cooperation

Australia has committed to establishing a Nature Repair
nature-positive Governments are creating
a set of nature goals under the
Market to issue Australian landholders with tradeable
biodiversity certificates
by cutting their environmental
impact on nature-loss
global biodiversity
framework
Page 22 30 April 2024 Sustainability and climate reporting for release this year
© 2024 Ernst & Young, New Zealand. All Rights Reserved.
EY | Building a better working world EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company
limited by guarantee, does not provide services to clients. Information
EY exists to build a better working world, helping about how EY collects and uses personal data and a description of the
to create long-term value for clients, people and rights individuals have under data protection legislation are available
via ey.com/privacy. EY member firms do not practice law where
society and build trust in the capital markets. prohibited by local laws. For more information about our organization,
please visit ey.com.
Enabled by data and technology, diverse EY
© 2024 Ernst & Young, New Zealand.
teams in over 150 countries provide trust All Rights Reserved.
through assurance and help clients grow,
EYSCORE 003921-24-AUNZ
transform and operate.
ED NONE

Working across assurance, consulting, law, This communication provides general information which is current at the time of
production. The information contained in this communication does not constitute
strategy, tax and transactions, EY teams ask advice and should not be relied on as such. Professional advice should be sought
better questions to find new answers for the prior to any action being taken in reliance on any of the information. Ernst &
Young disclaims all responsibility and liability (including, without limitation, for
complex issues facing our world today. any direct or indirect or consequential costs, loss or damage or loss of profits)
arising from anything done or omitted to be done by any party in reliance,
whether wholly or partially, on any of the information. Any party that relies on
the information does so at its own risk.

ey.com