NZX50 stocks warm to climate change reporting

More NZX-listed companies are recognising the impact of climate change in their reports. Photo / 123rf

PwC says more NZX-listed companies are starting to discuss the impact of climate change in their financial reports.

The consultancy looked into NZX50 March 2024 reporters - the second wave to mandatorily prepare climate-related disclosures (CRD) in compliance with standards the External Reporting Board (XRB) issued after they became effective in January 2023.

“We are starting to see a bit more discussion about climate impact in the financials,” PwC chair-elect and chief risk and reputation officer Karen Shires said.

“I guess it’s all heating up, would be one way of explaining it,” Shires told the Herald.

“We are seeing, even at a governance level, that it’s moving out of being just in the sustainability committee’s ambit and moving more into the mainstream of the business.

“As a first step in the new regime, we would say that companies are largely on track.”

Ultimately, improved climate change reporting would allow people to take a more informed industry and sector view.

Tiniya du Plessis, PwC’s financial and sustainability partner, said the new regime offered an opportunity for companies to tell their stories.

“We would expect them to become more tailored to the organisation as they continue reporting and adding maturity to this new regime.”

PwC last month said Shires had been elected as chair of the New Zealand firm, effective from October 1.

She succeeds Keren Blakey, who has ended her term after four years in the role.

In its report, PwC said the number of reporters who mentioned climate change in financial statements had increased over the past two years.

“However, despite more focus and interest from investors, regulators and the public at large, the discussion of climate-related matters in financial reporting remains limited.

“In line with our previous findings, there were few links between financial reporting and climate disclosures.

“For example, reporters who disclosed climate risks or opportunities directly linked to the value of investment properties in their Climate-Related Disclosures (CRDs) mentioned that the valuation of their investment properties could be impacted by climate change.”

However, they did not provide any specific revised valuation assumptions or estimates in the financial statements as a result of these climate risks.

Six out of eight reporters mentioning climate risks in their financial statements made it clear that risks were considered implicitly in valuation of investments and investment properties through general market assumptions, but no explicit adjustments were made.

All six acknowledged climate risks would likely have a greater impact on property valuations in the future.

Ten reporters disclosed long-term goals to reduce their carbon emissions in their CRDs.

Four mentioned in annual reports the significant impact of extreme weather events (Cyclone Gabrielle and the Auckland flooding of early 2023) which manifested as damage to infrastructure and associated insurance claims.

Two of these four quantified the actual impact in the reporting period on specific financial statement line items.

In the financial statements, five reporters had green financing in place, mostly to finance low-carbon and energy-efficient buildings.

One reporter’s green loans were linked to having a science-based target and reducing emissions.

“The next step for the reporters, as they come out of the first CRD cycle, will be to expand their scenario analysis and identification of climate-related risks and opportunities, and start applying the mandatory requirements to quantify the current and anticipated financial impacts of those risks and opportunities,” PwC said.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.