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NZX-listed companies are getting used to the idea of reporting on climate change in their annual accounts.
However they’re not all on board with the idea yet, says PwC’s chief risk and reputation officer Karen Shires.
More local corporates are coming to the party, but progress is slow.
The consultancy analysed 21 NZX-listed companies with June 30 balance dates. It found they showed far more coverage of climate change matters than formerly in relation to green bonds, where they were linked to achieving certain sustainable targets.
“We are starting to see a gradual change, certainly in the front half of annual reports, where there is a lot more coverage,” Shires says.
“Although there was only a small number who had any coverage of it in their actual financial statements those that did – three of them (Meridian, Genesis and Freightways) – were far more considered.”
PwC examined the NZX-listed companies’ reports to check two things in particular. One was how climate-related impacts on the financial statements were disclosed. The other – how auditors considered climate-related impacts in key audit matters.
The PwC report is timely. Just now there is increasing interest from investors and regulators in how companies handle Environmental, Social, and Governance factors and how the impacts are reflected in financial statements.
Of the 21 businesses PwC examined, 19 included non-financial climate-related information outside of the financial statements.
Six businesses noted the use of “green” finance.
Earlier this year, the Government passed legislation to mandate climate-related disclosures for publicly listed companies and large entities.
The new reporting standards are being developed in line with the Taskforce on Climate-Rated Disclosures framework. It will require organisations to assess the risks and opportunities of climate change.
It’s likely the disclosures will be required for the financial years starting in 2023.
“As large NZX-listed companies are going to have to comply with the external reporting board’s new climate-related disclosure standards starting next year, we expect that the thinking of these entities will mature as they prepare to report under those standards,” PwC’s report says.
“And in line with that, we expect to see more discussion about how climate-related risks and opportunities impact the financial statements of these businesses.”
Climate-related risks can have a broad impact on financial statements, the report says.
The business’s supply chain, customer base and physical location are some of the many ways financial statements could be affected.
Then there are the recent extreme weather events on the West Coast and in Canterbury and Napier. They indicate the physical risks the changing climate poses.
“However, we are still learning about how climate change might impact our sea levels, climate and weather,” the report explains.
Quantifying these risks’ potential impact in most entities’ financial statements “will continue to evolve as entities develop a better understanding of these risks,” it says.
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