Today, the Financial Markets Authority (FMA) published its final record keeping guidance (Guidance) for the climate-related disclosures (CRD) regime.

The FMA also released an accompanying document that summarises the key consultation themes and explains some of the changes to the Guidance from the June 2023 draft version (Summary Document).

A link to the Guidance is available here, and the Summary Document is available here.

Who should read this? Why?

All climate reporting entities (CREs) should read the Guidance.

The Guidance addresses the record keeping requirements in Subpart 2 of Part 7A of the Financial Markets Conduct Act 2013 (FMCA) and the Financial Markets Conduct (Climate-related Disclosures) Amendment Regulations 2023 (Regulations).

The Guidance follows the same overall approach as the earlier draft, but there are differences in the detail. CREs should read this final version and the Summary Document to ensure they understand the changes in order to keep up with the FMA’s expectations.

What does it cover?

The Guidance sets out the principles and the FMA’s expectations on CREs for keeping CRD records. 
Please see our previous alert where we discussed the draft version of the Guidance in greater detail (available here). In this alert we only highlight the key changes to the Guidance from the June 2023 draft version.

Guidance on record keeping requirements under the FMCA

Section 461V(3) of the FMCA requires CREs to maintain CRD records within a satisfactory system of controls. In relation to this requirement, the Guidance amends some of the draft wording to clarify what an effective system of controls looks like will depend on the nature of the CRE’s business and operation. This amendment was in response to submitters’ concerns that the draft Guidance indicated that record keeping processes should be centralised, which in their view does not reflect commercial reality.

Guidance on record keeping requirements under the Regulations

The Regulations were enacted after the draft version of the Guidance was published, so the Guidance contains changes to align with those Regulations.

The Guidance updates the FMA’s expectations for the requirement for CRD records to be readily identifiable and comprehensible (reg 252A). The Summary Document sets out the changes to the wording from the draft version. But essentially amendments were made to address the submissions that, given the extensive and often highly technical nature of the content in the climate statements, CRD records may not always be immediately comprehensible or able to be shared.

The Guidance still contains the FMA’s expectations for engaging with third parties, even though the enacted Regulations omit proposals in the draft regulations relating to when CRD records were kept by another person. 

Changes to the Appendices

The Guidance includes Appendices setting out practical examples of CRD records that could substantiate CREs’ climate statements.

The Appendices now include more internal resources to clarify that the Guidance was not intended to incentivise outsourcing of record keeping, and more examples showing integrated climate-related risk management into a CRE’s broader framework.

The Guidance also clarifies the illustrative nature of the Appendices (as opposed to prescriptive) following feedback that the Appendices may be interpreted as mandatory requirements.

Our view

It appears the FMA was generally responsive to the 13 submissions from a range of stakeholders during the formal consultation.

The Guidance states that “Proper records help CREs and their directors demonstrate compliance with their legislative duties and obligations”. This includes CREs’ ability to demonstrate that they can substantiate the content of their climate statements, and that directors have engaged in a sufficient level of oversight of the climate reporting process for due diligence purposes. Accordingly, we urge CREs to carefully consider this Guidance.

What next?

As CREs prepare their first climate statements, they can now finalise their record keeping processes based on the Guidance and the Regulations that are now in force.

If you have any questions about the Guidance, the Regulations or about the CRD regime generally, please contact one of our experts.

This article was co-authored Hannah Cross, a Solicitor in our Financial Services team.