In September 2020, the NZ Government announced its intention to implement mandatory reporting on climate risks and tasked the XRB with developing reporting standards to support the new reporting regime. While the corresponding Bill is still making its way through Parliament, the XRB has already established structures and begun developing the standard as "the government has a strong appetite to move fast". A final standard is expected to be issued in December 2022 with entities required to disclose according to the standard for accounting periods that start on or after 1 January 2023.

The forthcoming Bill requires that the NZ standard will build on the TCFD recommendations that address governance, strategy, risk management, and metrics and targets, and are supported by 11 recommended disclosures. The XRB has, therefore, taken the TCFD recommendations as well as the host of other standards, frameworks and guidance that have been developed in the sustainability area and is merging them into the NZ standard, improving them or making them NZ-specific where necessary. Large listed issuers and large financial organisations will have to apply the standard and currently it is expected that about 150 NZ organisations will come under the requirements and "a significant part of NZ emissions" will be covered. The resulting climate statement will have to be included in the annual report or must be accessible through a direct link from the annual report.

The XRB representative noted several challenges regarding the new standard:

• Standard-setting in such a short time is ambitious, therefore, outreach, research and development are being undertaken in parallel with initial drafts on certain subsections being published in October 2021 and March 2022 before a formal exposure draft of the full standard will be published in July 2022.
• The ambitious timeline means that the XRB is moving ahead of the IFRS Foundation and everybody else while trying to keep the NZ standard internationally aligned.
• The TCFD recommendations are recommendations and rather loosely worded. Turning them into a standard requires a lot of work regarding definitions to come up with to arrive at information that can be measured, reported and assured.
• Developments in the area of sustainability are moving very fast and "what was best practice 12 months ago is now middle of the road".
• Data to enable high-quality reporting might not be readily available, or be in formats or at the level of accuracy desired by reporting entities.

The XRB representatives overall message was: The NZ standard will be ambitious, forward-looking, principles-based. While developments are ongoing and moving fast, the new standard is intended to give entities a clear direction of where climate reporting is headed. The key consideration is usability by entities and by users. And while the first standard will focus on climate, the XRB approach is "climate first, but not climate only". The Bill enabling the climate reporting standard also gives the XRB the ability to issue guidance on a wider range of environmental, social, and governance (ESG) matters.

More information on the XRB climate standard-setting is available here on the XRB website.