New Zealand is to become the world’s first country to bring in a law forcing its financial firms to report on the effects of climate change.
The country wants to be carbon neutral by 2050 and says the financial sector needs to play its part.
Banks, insurers and fund managers can do this by knowing the environmental effect of their investments, says its Climate Change Minister James Shaw.
Legislation is expected to receive its first reading this week.
“This law will bring climate risks and resilience into the heart of financial and business decision making,” said Mr Shaw.
About 200 of the country’s biggest companies and several foreign firms that have assets of more than NZ$1bn ($703m, £511m) will come under the legislation.
“Becoming the first country in the world to introduce a law like this means we have an opportunity to show real leadership and pave the way for other countries to make climate-related disclosures mandatory,” said New Zealand’s Commerce and Consumer Affairs Minister David Clark.
The law will force financial firms to assess not only their own investments, but also to evaluate the companies they are lending money to, in terms of their environmental impact.
“While some businesses have started publishing reports about how climate change may affect their business, strategies and financial position, there is still a long way to go,” added Mr Clark.
Once the law is passed, companies will have to start reporting on climate change impact in 2023.
Banks have come under increasing pressure to step up efforts to help fight climate change.
Invest in nature
Last week, the Duke of Cambridge urged banks to “invest in nature” to help fight global climate change.
Speaking at an IMF and World Bank meeting, Prince William said protecting nature continued to play only a small part in combating global warming.
“We must invest in nature, through reforestation, sustainable agriculture and supporting healthy oceans… because doing so is one of the most cost effective and impactful ways of tackling climate change,” he said.
In the US, more than 300 businesses and investors, including tech giant Apple, called on the Biden administration to set an ambitious climate-change goal on Tuesday.
This would cut US greenhouse gas emissions by at least 50% below 2005 levels by 2030. This target is nearly double America’s previous commitment on emissions reduction.