New Zealand announced the introduction of legislation Tuesday that will make it the first country in the world to require its financial sector to disclose the impacts of climate change on its business. The legislation, The Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill has been introduced to New Zealand’s Parliament and is scheduled to have its first reading this week.

Among other provisions, the bill will require New Zealand financial institutions to report on the climate impacts of their investments and to explain the institutions’ plans for managing the climate risks and sustainability opportunities of their business decisions. Such requirements are also intended to enable investors and other stakeholders to transparently assess how entities are considering those risks and opportunities, and then make investment decisions accordingly.

These disclosure requirements will be mandatory for institutions with a high level of public accountability, such as large banks, large non-bank deposit takers, large insurers, and large managed investment schemes. The bill defines “large” as an entity with combined assets of more than $1 billion NZD, which is projected to impact more than 200 organizations. Failure to accurately report climate statements could result in imprisonment or fines.

Climate Change Minister James Shaw expressed enthusiasm for the new legislation, saying that “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.”

New Zealand is recognized as a global leader in climate change mitigation policy. Lawmakers passed legislation in 2019 that committed New Zealand to carbon neutrality by 2050. Parliament passed a subsequent motion in 2020 that declared a climate emergency and committed the New Zealand government to carbon neutrality by 2025.