The Financial Markets Authority (FMA) has published a second report following its reviews of climate-related disclosures in 2025. That report is available here and offers valuable guidance for climate reporting entities (CREs) to strengthen the disclosures in their climate statements. It is an extension of the FMA’s first report published in December 2024 (available here and discussed in our earlier article) and should be read together with that document.
Who needs to read it? Why?
The report will be relevant to all CREs, their directors, their advisors and their assurance practitioners. It is important that CREs are aware of the FMA’s expectations when preparing their climate-related disclosures, and the FMA’s feedback should be incorporated into future climate statements.
What does it cover?
The second report is an extension of the first report and together intended to describe FMA’s view of compliance with the CRD regime, identify areas for improvement, and provide useful feedback to enhance the quality of future disclosures. The Insights Report is divided into three main sections:
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Insights
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Addressing common misconceptions
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Future monitoring activities
Insights
The FMA highlights that broadly, its insights were similar to those raised in its earlier report. There was a wide spectrum of quality of statements from high quality with minimal review findings, through to those where the FMA identified multiple areas for improvement. Good practices identified included:
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presenting information in an understandable format;
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providing clear organisational structures (often in a diagram) to describe both governance and management-level activities;
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clear descriptions of processes for identifying, assessing and managing climate-related risk and their integration into overall management processes;
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use of appendices, especially for additional information not required by the Climate Standards;
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transparent disclosures relating to GHG emissions targets with appropriate detail.
Climate-related risks and opportunities disclosures
In addition to the insights raised in the 2024 Insights Report, the new report sets out a new focus area on the effectiveness of CREs’ identification and assessment processes for climate-related risks and opportunities. These processes are fundamental to the reporting framework and play a critical role in ensuring the regime delivers meaningful value. CREs are expected to assess the effectiveness of these processes to ensure they lead to the disclosure of material information.
The FMA’s monitoring reviews identified disclosures that suggest potential gaps in the identification and/or assessment of climate-related risks and opportunities. This includes:
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disclosures that were not specific to the risk, the opportunity, or the entity;
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disclosures that omitted or obscured material information.
We recommend readers carefully consider the examples the FMA gives.
Additionally, the FMA observed that CREs should consider which risk and opportunity identification, and assessment tools, methods and models are most relevant and effective for them.
The FMA also encouraged CREs to understand the data and limitations of any tools, methods and models used, including whether they are fit for purpose. The FMA’s guidance on the use of third-party providers can be found here.
Other observations
As the FMA points out:
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The Climate Standards require disclosure about the impacts of ‘climate’ on the entity, rather than ‘climate change’ in general.
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Information included by cross reference becomes part of the climate statement and must comply with the requirements of the Climate Standards.
Addressing common misconceptions
The FMA reminds CREs that as a general rule, the CRD regime is a disclosure regime and does not mandate any business or strategic actions that must be taken by the entity in its business. Instead, certain disclosures require CREs to undertake adequate data collection and analysis, while others require transparency about what actions the CRE is or is not taking.
The data collection and analysis process undertaken to determine climate-related risks and opportunities are intended to be useful for CREs and primary users to inform their decision-making.
In relation to transition planning, the FMA points out two misconceptions apparent from the reporting to date:
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Misconception 1: That having a transition plan is mandatory. The Climate Standards do not mandate that CREs must have a transition plan. But CREs must either disclose how they intend to position themselves as the economy transitions towards a low-emissions, climate-resilient future state; or, disclose that they are not planning for any change as to how they will position themselves – and in that event, they will not have mitigation or adaptation targets.
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Misconception 2: A transition plan is required to be a formalised, standalone or comprehensive document. The definition of transition plan set out in NZ CS 1 is “an aspect of an entity’s overall strategy that describes an entity’s targets, including any interim targets, and actions for its transition towards a low-emissions, climate-resilient future.”
Having said that, our view is that most businesses will, as part of their overall strategy, be responding to the physical and transition impacts of climate change which will require them to make disclosures. As the FMA points out, the value of a transition planning process is the development of long-term strategic resilience for the business.
Future monitoring activities
The FMA helpfully sets out how they will evolve their approach to monitoring over the coming years. While the focus areas highlighted are largely similar to those in the first Insights Report, there are some changes.
Second year of monitoring – periods starting on or after 1 January 2024
For the second year climate statements, FMA will continue to take an educative and constructive approach, focusing on supporting and encouraging compliance with the Climate Standards.
The FMA’s disclosure reviews will continue as further statements are lodged to assess whether CREs have substantially complied with the Climate Standards. They will focus on four areas, assessing whether:
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CREs have considered and addressed areas for improvement raised in the Insights Reports and in any individual feedback provided. The FMA expects CREs to continue to improve disclosures as well as continuing to develop expertise and processes.
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CREs have disclosed all material information to explain their climate-related risks and opportunities. The FMA sees as a fundamental step to ensure the CRD regime provides value, that the CREs are identifying and assessing climate-related risks and opportunities appropriately. The disclosure is intended to both demonstrate the identification and understanding of management and governance, and to enable primary users to make more informed capital allocation (i.e. investment) decisions.
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CREs have made reasonable efforts to comply with the disclosure requirements no longer eligible for adoption relief in year 2. The FMA will assess whether reasonable efforts have been made to comply with the new requirements to disclose current financial impacts and transition plan aspects of strategy.
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CREs have complied with the requirement to obtain assurance over their GHG emissions disclosures. The FMA will review the independent assurance reports to consider whether it complies with NZ SAE 1 Assurance Engagements, the engagement covers the appropriate scope required under the Climate Standards, the information that has had the benefit of assurance is clearly identified to primary users, and that the independent assurance report is lodged on the CRD Register. They will also assess those cases where there has been disclosure of additional voluntary assurance over further areas in the climate statements.
For the remainder of 2025, the FMA plans to provide further feedback verbally through individual engagement, especially for CREs with December and March year-ends in time that they can make changes before their third year of reporting. But for more significant matters, they will continue to issue feedback letters.
Third year of monitoring – periods starting on or after 1 January 2025
For the third year, the FMA will continue to carry out disclosure reviews and start reviewing underlying CRD records, especially where they identify significant issues.
Fourth year of monitoring – periods starting on or after 1 January 2026
The FMA is aiming to settle into a “steady state” from the fourth year of monitoring going forward. Under this approach, they expect to carry out proactive, risk-based sampling and more detailed review procedures, including examining the underlying records that support climate statements.
Our view
We welcome the FMA continuing to provide insights to CREs. Given the importance of continuing improvement over time, it is important that CREs understand clearly the FMA’s expectations not only for their own climate-related disclosure, but also from the disclosure of other entities. There is a risk in the individual feedback approach that CREs look at the disclosure of competitors which has already been lodged, and assume that is acceptable, when it is possible that the competitor is receiving specific feedback from the FMA.
The FMA, perhaps understandably given the Insights Report is essentially backward-looking, does not address the other “elephant in the room”. In Australia, the largest climate-reporting entities have already commenced their first climate reporting period (this started either on 1 January 2025 or 1 July 2025 depending on their financial year).
Given the high degree of integration between the New Zealand and Australian economies, we can expect to see emerging Australian disclosure practices influencing what happens in New Zealand. This will arise whether or not ASIC and the FMA are able to agree any form of mutual recognition of disclosure, because of the number of entities which are headquartered in Australia or taking their external advice from Australian sources.
This dynamic will require the FMA to be very clear in future as to what aspects of the New Zealand approach it regards as essential to be incorporated in disclosures by those entities which are New Zealand CREs when it is being primarily prepared in Australia or overseen by Australian governance.
What next?
If you have any questions in relation to the FMA’s new insights or are considering what it means for compliance with the climate reporting regime, please contact one of our experts.
This article was co-authored by Leanne Chew, a Solicitor from our Financial Services team.
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