New Zealand blends specially bright shade of green

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MELBOURNE, April 21 (Reuters Breakingviews) - Climate-change initiatives are heating up again. U.S. President Joe Biden is hosting a virtual summit on global warming for up to 40 world leaders this week, fresh on the heels of China vowing to work together with the United States on decarbonisation. JPMorgan (JPM.N) and Citigroup (C.N) just raised their sustainable-finance goals to a combined $3.5 trillion by 2030, as investors including Pimco push lenders to set tougher emissions targets. And new legislation from New Zealand could neatly tie it all together.

It’s no small feat that the two largest greenhouse gas-emitting countries appear to have divorced global-warming challenges from trade, security and human-rights concerns that have them at loggerheads. The ever-increasing size of bank pledges, along with their efforts to flesh out accounting for climate risk, suggests a higher degree of seriousness on the issue.

Most of these plans, however, and adherence to any ensuing guidelines, are voluntary. There’s no standard for assessing banks’ climate-finance targets, let alone punishment for missing or massaging them. And the renewed U.S.-China dialogue is, thus far, bereft of specifics.

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A proposal Prime Minister Jacinda Ardern’s government introduced in Wellington last week would help address such shortcomings. If passed, some 200 large banks, insurers, money managers and listed issuers of stocks and bonds operating in New Zealand would be forced to disclose their climate exposures.

Two elements make the legislation smart. Failure to comply could land a company’s entire board with a fine of up to NZ$500,000 ($360,000) and five years in jail. And it proposes to use guidelines from the G20-backed Task Force for Climate Related Financial Disclosures to identify, measure and manage risks and opportunities.

Many companies, including four big Australian banks that dominate the Kiwi market, already publicly support the task force’s work. That should limit corporate grumbling. It also would make it easier for investors and regulators to compare among and across sectors, divine the impact on earnings and assets, and even the effect on the cost and allocation of capital.

Such financial evidence should in turn help speed up the willingness of executives and investors to adapt their businesses to climate change. Adopted widely, New Zealand’s law would go a long way to blending a bright shade of green.

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- The New Zealand government on April 13 introduced a proposal into parliament that would require financial service providers to report the impact of climate change on their business. It is the first country in the world to introduce such legislation.

- The law would apply to banks and insurers with total assets of more than NZ$1 billion ($703 million); money managers with more than NZ$1 billion of assets under management; and all issuers of listed debt and equity securities.

- Failure to comply could subject all directors at a company to a fine of up to NZ$500,000 and up to five years in prison.

- Separately, the United States and China on April 17 issued a joint statement pledging to cooperate to “significantly advance global climate ambition on mitigation, adaptation, and support.” The two countries intend to keep discussing ways to decarbonise industry, increase use of renewable energy, foster green and low carbon transportation, among other issues.

- U.S. President Joe Biden is hosting a virtual Leaders Summit on Climate on April 22 and 23. Leaders of Antigua and Barbuda, Bangladesh, Bhutan, China, the European Union India, Indonesia, Kenya, Nigeria and the United Kingdom are among the 40 who have been invited.

- JPMorgan on April 15 said it “aims to finance and facilitate more than $2.5 trillion over 10 years” to help address climate change and contribute to sustainable development. On the same day, Citigroup said it would commit $1 trillion to similar goals over a similar timeframe.

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