- Additional funding for XRB to deliver climate reporting standards
- Further investment for climate action and achieving net-zero
Development of climate reporting standards
As expected, this year’s Budget allocates $17.29 million to the External Reporting Board (XRB) over the next five years to support its now expanded mandate to introduce standards and guidance for climate reporting, and to progress the integrated reporting project.
This funding is to equip the XRB to ensure climate risks are accurately reported by large financial institutions and accurately priced by investors to improve the macroeconomic stability of the financial system and contribute to Aotearoa New Zealand's carbon-zero 2050 target. In particular, the upcoming financial year includes an additional $4.17 million, which could potentially translate directly into additional XRB staff – a substantially bigger team of people.
The impending climate-related financial disclosures regime should facilitate robust and credible disclosures, flooding the market with the information needed to best assess how climate impacts businesses and the actual cost of these impacts. But, how useful these disclosures are will depend primarily on two factors:
- the nature of the standards to be developed by the XRB, and;
- the education and skills of both those preparing the disclosures and those understanding how to use them for decision-making purposes.
The FMA are to be responsible for independent monitoring, reporting and enforcement of the regime and the Ministry for Environment to provide guidance on scenario analysis. However, it is not yet clear what additional funding has been allocated to them for these purposes.
Further investment for climate action
Beyond the new disclosures regime, $13.9 million has been earmarked to support communities in a just transition to net-zero by 2050 over the next five years. This initiative increases support for communities facing transitions, enabling them to understand, plan and manage their transitions and build a productive, sustainable, inclusive and resilient future.
Additionally, $67.4 million will be used to support and implement the Carbon Neutral Government Programme (CNGP) (including $41.8 million for the Low Emission Transport Fund and $19.5 for the Stat Sector Decarbonization Fund). Via a coordinated programme, robust policy advice, and supporting agencies to reduce emissions (starting with fleets and coal boilers), the CNGP aims to make a number of government organisations carbon neutral by 2025.
With respect to policy development, $131.79 million will be used to support the Resource Management System reform (notably expected to be completed by 2024), and the Climate Change Commission (CCC) has been provided with an additional $9.58 million for the next five years, as the complexity and scope of the CCC’s role had been underestimated.
Speaking of the CCC, $19.7 million will be used to relieve urgent cost pressures in the Ministry for the Environment's (MfE's) climate change work programme to support the Government’s policy response to the final advice received from the CCC (although it remains to be seen whether this is just for policy development or otherwise).
Elsewhere, infrastructure projects have a climate-friendly flavour; $300 million will be used to recapitalise the New Zealand Green Investment Finance to invest in climate change mitigation, and to create jobs and opportunities, with a particular focus on decarbonising public transport, waste and plastics. Additionally, the extension to the Warmer Kiwi Homes Programme includes addressing electricity consumption to ultimately improve environmental outcomes.
At face value, the allocation of funding for all things climate is not to be sniffed at. The various areas of investment signal a commitment by the Government to create a foundation for real and ongoing mitigation and adaptation. But is it enough?
Climate change represents a very significant and interconnected risk for business, communities, ecosystems and regulators. The relatively small rises in global temperature have already impacted migration and breeding patterns, influenced transport and freight routes (and supply chains, as a result), and resulted in communities needing to retreat from coastlines.
Addressing these impacts requires an interconnected and holistic approach – and optimism dictates that Budget 2021’s approach be perceived favourably. If anything, at least funds have been earmarked for climate change. But, as is always the case, how programmes are implemented will directly influence whether these investments generate real returns.
NZ Budget 2021
Read more of what the CA ANZ advocacy experts say about the NZ Budget.Read more