Page last updated: 24 February 2025

FMA Exemption to complement XRB relief for assurance of Scope 3 GHG emissions reporting in 2025

The FMA has approved in principle a class exemption for climate reporting entities, who use Adoption Provision 8 in NZ CS 2, from the assurance requirement in section 461ZH of the Financial Markets Conduct Act (FMC Act) to the extent that their climate statements are required to disclose scope 3 GHG emissions for accounting periods ending 31 December 2024 through to 30 November 2025.

This exemption complements the optional relief which the XRB granted to such entities on 27 November 2024.
The XRB amended NZ CS 2 to include Adoption Provision 8 relating to the assurance of scope 3 GHG emissions disclosures. This adoption provision recognises the temporary challenges in obtaining sufficient reliable data to support the disclosures subject to an assurance engagement and to enable increased consistency across the assurance market. The FMA exemption recognises the same challenges.

Adoption Provision 8 is available to an entity when preparing and presenting climate statements or group climate statements in relation to accounting periods ending before 31 December 2025. The FMA exemption applies to the same period. Adoption provision 8 allows an entity to exclude its scope 3 GHG emissions disclosures from the scope of the assurance engagement. The FMA exemption will have the same effect.

The FMA exemption is designed to provide legal certainty to the market in relation to the interface of the optional relief in the Climate Standards made by the XRB under the Financial Reporting Act 1993, with the mandatory assurance obligations of CREs and their directors under section 461ZH of the FMC Act.

There will be one condition in the exemption notice. A disclosure notice about reliance on the exemption must be submitted to the Registrar at the same time the climate statements are lodged with the Registrar.

The next step is for FMA to instruct Parliamentary Counsel Office to prepare with urgency the class exemption notice, and arrange its gazetting.

Background

In October 2024, the External Reporting Board (XRB) consulted on proposed changes to NZ CS 2 Adoption of Aotearoa New Zealand Climate Standards. This included extending adoption provision 4 of NZ CS 2 to allow climate reporting entities (CREs) to elect not to disclose all or part of their scope 3 GHG emissions in the second reporting period. A new adoption provision 8 was also proposed to provide an additional year’s relief before mandatory assurance of scope 3 GHG emissions disclosures is required. This may benefit CREs that do not use adoption provision 4 and disclose scope 3 GHG emissions, but elect to use adoption provision 8 and delay assurance over all or part of the Scope 3 GHG emissions disclosures.

The Consultation closed on 30 October 2024. When the XRB analysed the consultation feedback in early November it noted one submitter had raised a technical issue about the interface of the proposed changes to the Climate Standards with Section 461ZH of the Financial Markets Conduct Act (FMC Act), and whether an exemption from the FMA is needed.

The XRB raised this issue with the FMA on 6 November, and the two agencies met on 12 November to discuss this issue and possible solutions.

The XRB announced to the market on 13 November it had approved proposals relating to amendments to climate and assurance standards, including a new one year adoption provision relating to the assurance of scope 3 GHG emissions. It said:

“We have been discussing with the FMA executive the possibility of a class exemption to provide additional certainty to support the optional delay of assurance over scope 3 GHG emission disclosures. The FMA has advised that it intends to consult on this before the end of the year.”

On 3 December 2024 the FMA commenced a targeted consultation about possible exemption relief for one year for those CREs in 2025 who disclose their scope 3 GHG emissions but do not have them assured, to complement the XRB relief.

To accommodate Christmas and summer holidays the consultation was extended to 28 January 2025. Most of the submissions were received in the last week of the consultation period.

FMA staff then analysed the consultation feedback. All submitters to the consultation supported a class exemption for CREs from the assurance requirement in section 461ZH of the FMC Act to the extent that their climate statements are required to disclose scope 3 GHG emissions for accounting periods ending 31 December 2024 through to 30 November 2025. Some submitters provided feedback on possible conditions for exemption relief.

FMA staff then prepared a paper which went to FMA Exemptions Division board members on 13 February. The recommendations in this paper were discussed by Division members at a meeting on 20 February and the recommendation to grant exemption relief was approved.