New Zealand Brings World's 1st Climate Change Law For Banks, Investment Firms

In a milestone law, New Zealand will now require banks to show the impact of their investments on climate change under first-of-its-kind legislation that promises to bring transparency in the financial sector¡¯s environmental record.

Reuters

Reported first by AFP, with the New Zealand law, climate risk reporting would become mandatory for banks, insurance companies and investment firms that conduct business within the nation.

Also Read: Apple Says It Now Uses 100 Percent Green Energy, But There's A Catch

According to Commerce Minister David Clark, getting the opportunity of being the first nation to introduce such law allows them to lead the way forward for the world, ¡°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.¡±

What would this really lead to?

With the climate reporting being open, investors would get to see how the company they plan on putting their money into, impacts the environment.

According to Clark, this would also make financial institutions rethink their decisions, as well as consider real-world impact caused by their investments on the environment while also allowing the common public to see this impact from afar.

Also Read: Google To Be Carbon-Free By 2030, Run Entirely On Renewable Energy

Clark added, ¡°It is important that every part of New Zealand's economy is helping us cut emissions and transition to a low-carbon future. This legislation ensures that financial organisations disclose and ultimately take action against climate-related risks and opportunities.¡±

The legislation that was first introduced on Monday, if passed successfully, would make it compulsory for financial institutions to report climate impact by 2023.

According to New Zealand¡¯s climate change minister, James Shaw, the annual reports would highlight the fact that high-carbon investments would become less attractive as stringent measures to take grasp of emissions in the nation come into play.

Also Read: Infosys Becomes Carbon-Neutral, 30 Years Before Paris Agreement Deadline

Shaw explains, ¡°We simply cannot get to net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate. This law will bring climate risks and resilience into the heart of financial and business decision making.¡±

Reuters

Should India have a similar law?

Ideally, yes. With stock exchanges like BSE that hit a market capitalization of $2.8 trillion, having a measure to help make organisations in India more eco-friendly could definitely create a huge impact.

Also Read: Google All Set To Be A 100 Percent Renewable Energy-Powered Company By The End Of 2017

But for this measure to become successful in India, it would have to be more comprehensive, considering the size of the nation and the number of businesses that exist. Independent audits and enforcement of the law is far more complicated than just passing it for making a point, though, so it would be interesting to see how New Zealand benefits from their climate risk reporting legislation.