FMA consults on proposed guidance on references to climate statements in disclosure documents

The Financial Markets Authority – Te Mana Tātai Hokohoko (FMA) is seeking feedback on draft guidance concerning references to climate statements in disclosure documents. This proposed guidance aims to assist climate reporting entities (CREs) in determining how they should reference their climate statements within their disclosure documents.

 

Consultation relevance and submission deadline

This consultation is relevant to all CREs. Clients wishing to make a submission on the draft information sheet have until 30 August 2024 to do so.

 

Key points of the proposed guidance

The FMA has highlighted that the introduction of the climate-related disclosure (CRD) regime, its impact on CREs, and their climate statements themselves are considered "material information", which could influence an investor's decision to invest. CREs currently using a continuous Product Disclosure Statement (PDS) must consider whether their PDS and/or entries on the Disclose register require updating.

The draft guidance clarifies that the expected disclosure need not be lengthy or repetitive of the climate statements. The primary purpose of this disclosure is to alert investors to the issuer’s status as a CRE and inform them how to access the climate statements.

 

Key expectations from the FMA

Product Disclosure Statement (PDS)

The FMA suggests template wording for referring to CRE status and how to locate climate statements in a PDS for equity, debt, and managed investment scheme (MIS) offers. The guidance also considers additional disclosure in the risk section of the PDS in cases where climate-related risk significantly impacts the financial position or performance of the issuer.

Other Material Information (OMI)

The draft guidance encourages CREs to consider uploading climate statements on the Disclose Register as "material information," in addition to filing them on the new CRD Register. Alternatively, the FMA suggests issuers cross-reference the CRD filing in the OMI and PDS.

Statement of Investment Policies and Objectives (SIPO)

The FMA expects that climate-related investment policies that are directly relevant to achieving the investment objectives and strategies of the issuer are explained in the SIPO or that links are provided to these policies.

Annual reports

The guidance summarises existing requirements under Part 7A of the Financial Markets Conduct Act and the Aotearoa New Zealand Climate Standards relating to annual reports. If CREs include their climate-related disclosures as part of their annual report, rather than standalone climate statements, the CRE must include a table or index within the annual report clearly identifying the location of the individual climate-related disclosures.

Timing for document updates

The FMA expects CREs to update their PDS or register entries within 12 months of the publication of the finalised guidance, or when their PDS is next updated, whichever occurs first. Updates can be done by way of a replacement PDS or a supplementary document.

 

Our view

We believe the proposed guidance will help CREs understand the FMA's expectations regarding disclosure documents related to the CRD regime. While the suggestions for PDS disclosure appear sensible, there are concerns about the proposed text length potentially affecting MIS managers due to PDS word limits. We view the OMI as the appropriate document to house key information regarding CRD, with cross-references to climate statements on the CRD register being a preferable approach to creating additional filing obligations.

 

What's next?

Submissions on the draft guidance close on 30 August 2024. Please contact us if you would like to discuss the impact of the proposed guidance on your disclosure obligations or if you need assistance in making a submission.

For more information or to discuss this further, please get in touch with our team.