Source: New Zealand Parliament – Hansard
Hon TODD McCLAY (National—Rotorua): Thank you very much, Madam Speaker. National is supporting this legislation, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill, at second reading but we will be seeking Supplementary Order Papers to clarify the effect and lessen cost but at the same time ensure that the legislation will meet its intent. However, therein lies the challenge, because the intent of the bill is not actually to directly have any effect upon a company and climate change, or that company’s part in climate change; it’s merely to have them report upon how climate change might affect their business in the future.
When I listened to the Minister James Shaw’s speech just a moment ago, I think he oversells the benefit and the likelihood that this bill will achieve the things the Government says they want to, albeit their intention is well meaning, because it’s not about the carbon footprint of a company or a business covered by the legislation; it’s how climate change might affect that business now or some time in the future.
The purpose of the bill is very clearly set out: “ensure that the effects of climate change are routinely considered in business, investment, lending, and insurance underwriting decisions”. Well, risk already is by these companies. These are large entities that are, more often, listed on stock exchanges in New Zealand, or can be overseas, and they already have significant obligations to report risk, to consider risk. In the case of this, therefore, when it comes to climate change, where it doesn’t move them directly, or actually indirectly, to do anything about their own activity when it comes to their carbon footprint, then it is well meaning but actually won’t make the changes that the Minister has just spoken about.
For instance, they need to prepare an annual climate statement that discloses information about the effects of climate change on their business or any fund they manage. Well, they get to say, “Here is the effect”, but they don’t actually have to do anything about it. Now, a debate as to whether they should is secondary, because, actually, they already report, they already consider these things, and I fear that the New Zealand public that believe that climate change is an important issue, and listening to the Minister’s speech, or secondly in considering what the Government has said this will achieve, will end up being disappointed, because I’m not sure it will achieve that.
Once they produce this report, they have to obtain independent assurance about the part of the climate change statement that relates to the disclosure of greenhouse gas emissions. So the Government is saying, “We need you; you’re a large entity that is on the stock exchange, that has absolute scrutiny as to your activities, that takes other people’s funds and lends them or invests them and must report through the stock exchange, through the media, to those shareholders or those investors, but actually we need you to go out and get independently verified—this piece of work that you have done under this bill—to talk about what effect climate change might have on those investments some time in the future, at a cost, because we don’t trust you.”
There are two examples of this I want to make that I think don’t make a lot of sense. The first is a bank that lends predominantly in the housing sector, and perhaps they have portfolios that look to lend to build houses, beachfront sea resorts, or hotels for the tourism sector. Well, they’re going to have to go out and have an assessment done as to whether or not climate change will have an impact upon those assessments based on sea-level rise or, more than that, Government policy that makes it more expensive, more difficult to build at some point close to the sea, because of the Government’s view or a council’s decision as to whether or not, with sea-level rise, that is something that is acceptable—putting aside that, actually, the banks themselves already have to consider risk.
Well, they’ll come out and they’ll give the report that says, “Actually, we believe we have covered this risk off for our investors. There isn’t a great risk to us, except if the Government keeps changing the rules every time they come to Parliament, because they have a piece of legislation like this that is well intentioned and wants to suggest to the public that they are taking the issues seriously and actually doing something but they’re not. Costs will go up and, therefore, actually there could be a risk.” And so the Government already plays quite a significant role, when it comes to risk, that these businesses need to consider, but it not saying to them, if you find there is a risk, you must change your behaviour and not lend in that case to build the houses that we need, it’s saying you just need to report on it.
There is a second example here when it comes to the assurances around greenhouse gases, and it’s the agricultural sector, because, actually, banks in New Zealand lend to the agricultural sector across the board, including when it comes to animal farming—dairy. Well, the banks that are lending already have to factor in climate change requirements now and perhaps in the future when it comes to Government requirements on land. So a bank in New Zealand will have to go out and have an assessment done as to the risk of climate change to their investments—them lending to people in New Zealand to buy farms and to farm, to produce the food that we need to sell overseas for our economy. And it might come back and say, “Actually, we don’t believe there is a significant risk here, except when it comes to Government policy.” because if the Greens got their way and there were no more cows in New Zealand, actually, there would be a great risk to lending because of the uncertainty that creates. Now, that’s not the intention of this bill, because it doesn’t make them change, it makes the Green Party and the Government feel good, and perhaps some New Zealanders, but it isn’t having the effect that the Minister said that it would, other than reporting and cost and change. And I would say the Government has a very large role to play in this.
The National Party is very proud of its record when it comes to climate change and activity that is taken and things that actually will make a difference. We recognise that New Zealand must play its part on climate change issues in New Zealand and internationally, that’s why our climate change spokesman will Zoom into the other side of the world—he won’t get on a plane with nine or 10 other people and fly all the way over there to a climate change conference, as James Shaw as Minister will, with a lot of people at a time when, actually, most things in the world are being done by Zoom and Mr Shaw and members opposite wanted Parliament to be done by Zoom, but he’ll jump on a plane and go off over there. The point of this is we think we need to play our part, and actions are louder than words. This piece of legislation is words, albeit well-meaning. James Shaw jumping on an airplane with 10 others and flying to the other side of the world, and then having to come back and take spaces that are desperately needed in MIQ is action, not words—action that actually probably makes climate change worse, not better.
We will be seeking change in three areas when we come to the committee of the whole House stage, and the Minister’s mentioned this. The first is around time frames. The time frames were changed in committee, and I hear from the Minister that the Minister responsible will bring forward Supplementary Order Papers (SOPs). It’s disappointing that, actually, through his MPs and the officials that wasn’t presented in the committee for us to consider them if they are that important. It’s almost as if he’s realised afterwards he’s made a mistake and wants to change it, but we think the time frame of the current legislation will enter into force within 12 months after Royal assent—we think that is too soon because the standards that these businesses will need to report to are not set yet, and actually they are significant companies and large companies that take their responsibility seriously. They will want to meet this requirement. We think it should be longer and will bring forward an SOP to make that time frame longer. Not so long they don’t have to report, even though it won’t make a change to climate change, but a reasonable period of time.
We also think that the public sector and the private sector should be treated the same. So what the Government has said is this will be an obligation on the private sector, but Crown entities actually will have to meet a different requirement based on a letter from a Minister. They are giving themselves an exemption and an opt-out and they shouldn’t. If it’s good enough for the private sector, it’s got to be good enough for the entities that the Government controls—the standards should be the same, because it sets a very, very bad precedent: “Do not what we do, just do as we say.”, and the private sector is sick of that.
The final one is the comply-or-explain approach. The comply-or-explain approach was taken out in committee, and the Minister mentioned that’s to level the playing field. Well, it actually doesn’t, because if there is a business that goes to an extent to find that climate change has no direct, meaningful impact upon their business, they should be able to say that. If it does have an impact upon their business and they don’t report it, they fall foul of the legislation, they have broken the law, and they will be held to account, but again what the Government is saying is “We don’t trust you, so we are going to make you go to the extent of reporting on something you have nothing to report on.” And I think that comply-or-explain is a better approach; it wouldn’t be used by many businesses, but it could be by some—it should be there. They are not allowed to break the law. They must still report if it has an impact upon them, but if it doesn’t, they shouldn’t have to go to the expense or the extent of meeting a requirement that doesn’t have an impact upon them and for them then to report, “We have nothing to show here”, they should be able to see it.
In those three areas, we will be tabling SOPs and hope the Government will work with us to make sure the legislation is not onerous upon these businesses but actually at least is around the intent of what the Government wants to do, which is send a signal, not actually have any impact upon climate change. The best way Mr Shaw can have an impact upon climate change is to Zoom to that conference over in Glasgow, not get on a plane with 10 other people.