Date posted: 15/08/2023

Companies (Directors Duties) Amendment Bill receives Royal Assent

The Bill allows directors to consider environmental, social and governance matters when considering the best interests of a company

In brief

  • CA ANZ responded to the Economic Development Science and Innovation Select Committee’s consultation on the Bill in December 2022
  • Legal opinions conclude that a duty for directors to consider the environment and nature already exists
  • Reporting periods for XRB Climate Standards have commenced and signals that Modern Slavery reporting will be required in NZ

The Companies (Directors Duties) Amendment Bill has received royal assent and came into force on 8 August 2023. Section 131 of the Companies Act 2023 now includes the following duty for directors in New Zealand:

‘To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit (for example, environmental, social, and governance matters)’.

The Bill can be accessed on the New Zealand Parliament website.

CA ANZ responded to the consultation on this Bill at the end of 2022, agreeing with the principle that directors should consider factors beyond profit when driving successful outcomes for the companies they serve. In our opinion, people, planet, and profit all require consideration and alignment of these factors is critical for long-term success of business. 

Despite the clarity the Bill will provide, legal opinions had already concluded that directors should consider material climate and nature matters. The 2019 legal opinion by Chapman Tripp for the Aotearoa Circle concludes that ‘directors must act reasonably to inform themselves about, consider and decide how to respond to climate change risk, as they would any other financial risk’. A subsequent legal opinion in 2023 also by Chapman Tripp for The Aotearoa Circle advises that prudent directors and businesses should be starting on the path to identify, assess and manage nature-related risks, particularly if they depend on the environment for their business model.

In January 2023, the XRB’s climate standards became effective in New Zealand for certain large listed entities and financial institutions. Further in July 2023, the New Zealand Government announced its intention to introduce modern slavery reporting legislation that will require organisations and businesses to be transparent about their operations and supply chains through a new public register. Progress in these areas demonstrates that ESG is already an important consideration for businesses. 

This view is also consistent with investor expectations. The New Zealand Shareholders’ Association (NZSA) issued a policy statement effective from January 2023 which recognises the more significant role that environmental sustainability considerations play in investor decision-making and the emerging regulatory framework in New Zealand.

"Investors' appetite for high-quality ethical funds has continued to grow. No longer satisfied with simply avoiding harm, research shows that two-thirds of Kiwis want their investments to contribute a positive impact to the world"
Dean Hegarty, Executive Manager at Responsible Investment Association Australasia (RIAA).

At the Responsible Investment Association Australasia (RIAA) conference in August 2023, Dean Hegarty, executive manager at RIAA, spoke about how investors’ expectations are rising and announced that for every dollar now invested in New Zealand, 57 cents of this goes to a RIAA certified fund.

Submission on Companies Directors Duties Amendment Bill

Our December 2022 response to the consultation on the Bill 

Read more

The new XRB climate standards 

CA ANZ Business Reform Leader Karen McWilliams FCA responds to the XRB’s recently released climate standards.

Read more

Environmental Risks top the Global Risks chart  

Global risks table turning green and recent updates from the Taskforce on Nature-related Financial Disclosures (TNFD)

Find out more

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