Climate-related financial disclosures - Submission Reference no: 49

Climate-related financial disclosures
Submission Reference no: 49
David Benattar (Chief Sustainability Officer), The Warehouse Group Limited
26 The Warehouse Way
Auckland
New Zealand
Ph: +6421705272
david.benattar@thewarehouse.co.nz
Submitter Type: Business / Industry
Source:              Web Form
Overall Position: Largely support

 Clause
 What type of organisation do you represent?
 Position
 Listed issuer
 Notes

 Clause
 Q.1 Is the TCFD reporting framework the most appropriate framework for New Zealand?
 Position
 Yes in part
 Notes
 As a general principle, there is a need for a recognised framework that encourages the disclosure of risk posed by the climate
 crisis. While the TCFD is widely endorsed, alternative frameworks exist that by some accounts are more developed in approach,
 such as the Climate Disclosure Standards Board framework. Consideration should be given to the necessity of mandating a
 specific framework relating to climate disclosure versus the necessity of disclosure under approved frameworks. These
 frameworks could include the TCFD and CDSB, among others. Ultimately, with understanding of risk exposure, development of
 strategies, metric identification and tracking, and reporting – quality of standards will improve, and frameworks will emerge as
 being more valuable than others. Noting the advocation of the TCFD in the appendices of the report, a balanced scorecard
 approach showing why TCFD is the preferred framework would be useful. Whichever framework is adopted, a single reporting
 framework is beneficial from both a reporting entity and stakeholder perspective. Clear guidance on what is required to be
 compliant assists reporting entities to prepare and assess climate-related risk and articulate this in a uniform manner to
 stakeholders. This chosen framework may have compulsory and optional reporting elements, which recognizes that initially not
 all companies will have developed an integrated view of their climate risk. We agree that the disclosure of climate related
 information must go beyond the disclosure of GHG emissions and include the disclosure of climate related risks as outlined in
 Transition and Physical Risks on page 14 of the document. Traditionally and arguably in the current market The Warehouse
 Group operates, focus of annual reports have been around financial information. However, in recognising the importance of
 assessing and reporting on the business from a more holistic perspective, The Warehouse Group has adopted the Integrated
 Reporting framework which seeks to take a broader view of the ways in which the business impacts the community and
 environment it operates. While this does not mandate climate-related disclosures, such as the TCFD would require, the two
 frameworks can co-exist and strengthen reporting to stakeholders.

 Clause
 Q.2 Do you agree with the conclusions we have drawn at the end of chapter 1?
 Position
 Yes in part
 Notes
 Refer to the above – agree in principle that climate change presents a material risk to businesses generally and this risk should
 be measured and reported to stakeholders. Due to the principles-based approach to TCFD, the degree to which a business is
 exposed to climate-related risks is subjective, along with determining materiality of any risk and ultimately its need to be
 reported. To mitigate subjectivity around exposure to climate-related risk, a standardised framework which details physical and
 transitional risks along with how to assess materiality will go a long way.

 Clause
 Q.3 Do you agree with the objective as set out above?
 Position
 Yes
 Notes
 Yes – to the extent that the objective of assessing effects of climate change is intended to prompt action around risk mitigation
 strategies and detailing such information to stakeholders, including capital providers whom will allocate capital in an efficient
 manner based on risk-reward assessments. TWG understands that the disclosure of GHG emissions and reduction effort is

independent and distinct from the reporting of the disclosure of the transition and physical risk and mitigation actions
companies take.

Clause
Q.5 Do you agree with the problem definition? Are there other aspects we should consider?
Position
Yes
Notes
Yes. Ultimately, as a business we need to understand what information our board requires to make better decisions on behalf
of shareholders. Adopting and aligning to a framework that is not directly financially focused will take effort, however, the
requirement of such disclosure will ideally embed the principles of sustainability into the day-to-day operational activities of the
business.

Clause
Q.6 What are the implications of section 211 of the Companies Act 1993 for the disclosure of material climate-related
information in annual reports?
Notes
Depending on the view a given board takes on climate related risk, harm may not be caused due to change of the nature of the
business during the financial year in question. Therefore, the requirement to disclose risks relating to climate are ambiguous
under section 211.

Clause
Q.7 What are the implications of the NZX Listing Rules for the disclosure of material climate-related information by (a) equity
issuers, and (b) debt issuers?
Notes
Again, given the variability of information received around climate-related risks and therefore a board’s view of such risk, along
with its materiality that would warrant disclosure, a business’s exposure can be difficult to gauge. Mandating a standardised
framework adequately allows for such an assessment to take place as well as detail this to stakeholders.

Clause
Q.8 How should proposed adaptation reporting under the Climate Change Response (Zero Carbon) Amendment Bill and the
climate-related financial reporting disclosures proposed in this discussion document best work together?
Notes
No comment

Clause
Q.9 Do directors' legal obligations in New Zealand result in consideration, identification, management and disclosure of climate-
related risks?
Notes
No comment.

Clause
Q.10 Do you agree with the legal opinion prepared for the Aotearoa Circle?
Position
Yes
Notes
Yes. Directors have a fiduciary duty to act in the best interests of the company and shareholders as well as exercising an
appropriate duty of care when making decisions that impact stakeholders. Climate-related risks should be considered when
assessing the long-term viability of a business and to the extent material, should be disclosed to stakeholders.

Clause
Q.11 Do you favour the status quo or new mandatory disclosures?
Position
New requirements
Notes
The Warehouse Group have addressed climate change risk through voluntary disclosure and favour disclosure to promote
climate action. While The Warehouse Group’s approach to reporting may not be materially impacted through mandating climate-
related disclosure, we recognise that there are laggards and a mandatory approach is necessary to drive change.

Clause
Q.12 If a mandatory approach is adopted, do you agree with the Productivity Commission that a mandatory (comply-or-explain)
principles-based disclosure system should be adopted?
Position

Yes
Notes
We favour principles rather than a prescriptive approach. However, specific metrics need to be identified so that there is
comparability between years and business.

Clause
Q.13 If the status quo is retained, how can government and investors be confident that risks would be routinely considered in
business and investment decisions?
Notes
As per Q.11, The Warehouse Group has taken a proactive approach but recognise that there are laggards. In which case
reliance will be on Boards, the Market and customers to influence change.

Clause
Q.14 Do you consider the TCFD framework to be best practice in relation to climate-related financial disclosures?
Notes
Refer to Q.1 answer, particularly around providing more evidence that TCFD disclosures are best practice. However, selection
and implementation of a selected standardised framework is preferable to avoid incomparability of information.

Clause
Q.15 What are your views about whether the TCFD’s recommended disclosures will provide useful information to institutional
investors and other users?
Notes
In recent years, focus on responsible investment by institutional investors has grown. Disclosure by reporting entities has
somewhat been governed by the extent to which a given reporting entity has existing or prospective shareholders seek
information on ESG related topics. Disclosures can be wide ranging and may not be comparable across time periods and
business across and within industries. In the event the TCFD’s recommendations are adopted, they will provide more
information to institutional investors around climate-related risks. Whether this information is utilised in this market in the near
term is a separate question. The Warehouse Group takes a long-term view of its disclosure responsibility around ESG topics as
investor focuses broaden beyond risks traditionally accounted for. Some of our concerns around the framework are: • There
are limited quantifiable measures to make comparisons. • Future related metrics and scenarios maybe unreliable. How will
these be monitored and what assurances will there be?

Clause
Q.16 Do you think the proposed disclosure system will encourage disclosing entities to make better business decisions?
Position
Yes
Notes
Yes. Wider views of risk exposure and assessment can only lead to better business decisions. Even if not acted upon, the
consideration of climate risk and broader sustainability topics is beneficial as it becomes embedded in day-to-day thought and
decision-making processes.

Clause
Q.17 Is the definition of materiality in the IASB Conceptual Framework for Financial Reporting appropriate for this purpose?
Position
Yes
Notes
No further comment.

Clause
Q.18 What comments do you have on our proposal that non-disclosure would only be allowable on the basis of the entity’s
analysed and reported conclusion that they see themselves as not being materially affected by climate change, with an
explanation as to why?
Notes
A simple statement made by a business, after undertaking a risk assessment, that there is no material climate-related risk,
should be deemed insufficient. The evaluation process should be disclosed along with the exposure assessment and
materiality thresholds. So long as this process is undertaken and disclosed – this should be sufficient for capital markets to
judge the quality of such a disclosure.

Clause
Q.19 What are your views about providing a transition period where incomplete disclosures would be permissible?
Position
support
Notes
This would be appropriate given that information may not be readily available.

Clause
Q.20 If there is to be a transition period, what are your views on it being for one financial year?
Position
support
Notes
No further comment.

Clause
Q.21 Should all of the following classes of entity be subject to mandatory (comply-or-explain) climate-related financial
disclosures: listed issuers, registered banks, licensed insurers, asset owners and asset managers? (check all that you believe
should fall in scope)
Position 1
asset managers
Position 2
asset owners
Position 3
licensed insurers
Position 4
registered banks
Position 5
listed issuers
Notes
No further comment

Clause
Q.22 Should any other classes of entity be required to disclose?
Notes
No comment

Clause
Q.23 Should there be an exemption for smaller entities?
Notes
No comment

Clause
Q.24 If there were to be an exemption: (a) What criterion or criteria should be used: annual revenue, total assets, a combination
of the two, or some other measure or measures? (b) Which dollar amount or amounts would be appropriate? (c) Should there
be a requirement to adjust for inflation from time-to-time?
Notes
No comment

Clause
Q.25 What are your views about our proposal to have a stand-alone climate-related financial disclosure report within the entity’s
annual report?
Position
oppose
Notes
A key benefit of Integrated Reporting is the understanding and conveyance of how business decisions influence stakeholders
along with the wider community and environment. While a stand-alone report has some value, in isolation (i.e. a climate risk
assessment and strategy development) without either consideration for or discussion of financial or other implications, this
report may be less meaningful than a holistic assessment. TFCD disclosures should form part of this assessment but
potentially not take up real estate in an already information heavy document. Also, should a stand-alone approach be preferred,
query the necessity for any stand-alone document to be prepared and released in conjunction with the annual report.
Reporting is an important but intensive process for the business. Staged reporting means stakeholders are not overwhelmed
with information at one point in the year, instead have an opportunity for information to be received and digested throughout.
Any report issued outside of the businesses balance date should be prepared on the basis that it too would be prepared
annually and cover a comparable period of twelve months.

Clause
Q.26 What are your views about providing for disclosing entities to include cross-references or mappings within that report to
assist users to find relevant information?
Notes
To the extent that a mandatory framework for climate-related disclosure is adopted, information should be presented in such a

manner that is accessible to those looking for it. Should information be located across multiple sections of a document,
perhaps a summary graphic or table of contents (similar to the approach of the financial section of an annual report) could
provide cross references to relevant commentary and metrics.

Clause
Q.27 What are your views about requiring explanations for non-compliance to be included in the annual report?
Notes
This is a fair requirement to ensure comparability.

Clause
Q.28 Should there be mandatory assurance in relation to climate-related financial disclosures?
Notes
Stakeholders – notably investors – rely on the information provided by companies to aid in their investment decision process.
The information provided should be accurate and comparable across time periods and industries/businesses. Depending on
the focus/mandate of the investor and the weight placed on responsible investment in the investment decision process, there
potentially is a high degree of reliance by the investor on the accuracy of climate-related information that is disclosed.
Therefore, while some degree of assurance is warranted, the extent is difficult to comment on at this stage of the process. The
difficulty is understanding what the scope of the assurance provider would be and the framework by which they are assessing
disclosures in order to provide assurance.

Clause
Q.29 Which classes of information should be subject to assurance if it were to be mandatory?
Notes
Certifications exist around carbon measurement and offsetting of GHG emissions. The Warehouse Group currently undertakes
an emissions assessment and offsets 100% of these emissions. This is verified by Toitu Envirocare (previously Enviromark) and
last year The Warehouse Group was the first retailer in New Zealand and the third in the world to receive the carbonzero
certification. There are notably other organisations that assess and provide certifications across the sustainability spectrum,
including environmental, social and community impacts of the business’s operations. The number and variety of certifications
makes navigating what is considered “best practice” difficult, as well as which certifications give relevant stakeholders the level
of assurance they require when assessing climate-related disclosure – not to mention any wider ESG disclosure. At a minimum,
levels of GHG emissions would be a good starting point for measurement, verification and disclosure.

Clause
Q.30 Do you consider that assurance should be required in relation to GHG emissions disclosures?
Position
Yes with conditions
Notes
Yes, refer to question 29 above. Scope 1, 2, and 3 emissions should be required to be disclosure and independently verified.

Clause
Q.31 Is limited assurance the only practicable approach in relation to TCFD disclosures, or is reasonable assurance also
feasible?
Notes
Reasonable assurance on quantifiable metrics such as such as GHG emissions would be feasible. However limited assurance
would be practicable for other areas.

Clause
Q.32 If we do not introduce mandatory assurance when a disclosure system comes into effect, should it be reconsidered in the
future?
Position
Yes
Notes
Yes. This should be reconsidered based off the quality of disclosures and on comparing the outcomes against the original
objectives.

Clause
Q.33 What comments do you have on the proposal to bring the disclosure system into force for financial years commencing six
months on or after the date that the regulation is introduced?
Notes
Already there are a handful of companies voluntarily disclosing information of this nature. Businesses that haven’t done so will
be most impacted by the length of this time frame. The short deadline may impact on the quality of the information provided.
For example, after implementation, will a full years’ of GHG emissions data be available? However, with an understanding that
the disclosures will improve over time, and the imperative that a legislated framework be implemented in a timely manner in
order to realise positive environmental impacts, this is a fair trade off.

Clause
Q.34 Do you consider that smaller entities should be provided with a longer transition if there were to be no exemption for
them? If so, how long should that additional period be?
Notes
No comment

Clause
Q.35 Do you have any views about the legislative means for implementing new mandatory (comply-or-explain) disclosure
requirements?
Notes
No comment

Clause
Q.36 Do you consider that there is a role for government in relation to guidance, education, monitoring and reporting?
Notes
Yes, for all areas.

Clause
Q.37 Are there other activities that a government agency could usefully carry out?
Notes
Identifying best practice – see question 39 below.

Clause
Q.38 Which government agency or agencies will be best able to carry out these functions?
Notes
No comment

Clause
Q.39 What would you need to assist you with a full set of TCFD disclosures?
Notes
Guidance on best practice disclosures from international and local businesses and centralised resources and training.
Understanding that internationally such disclosure is in its infancy, more resources in a centralised place along with workshops
will assist businesses to undertake risk assessments, identify exposures and mitigation strategies, select performance
indicators and metrics, and finally disclose material information

Clause
Q.42 Do you have any other comments?
Notes
The Warehouse Group welcomes the pace at which focus on climate-related disclosure is occurring, from both the Government
as well as external stakeholders. Based on conversations with listed-corporates that have broad investor bases that extend to
international markets, disclosure of this nature is being sought and in some cases is a fundamental part of the investment
decision process. As the New Zealand market directs focus towards such disclosure, it is helpful from both the reporting entity
and the recipient to have a framework or frameworks in place that are internationally recognised and supported by legislation.
Background Information 1. 2019 was the year TWG moved to integrated financial reporting, which makes a recognized effort to
capture our broader business impact and performance. 2. TWG has been measuring and reporting on our Greenhouse gas
emissions since 2009. Since 2013 we accredited our reporting with Toitu CEMARS certification. 3. We achieved a CarboNZero
certification in February 2019, when we announced we had offsetted all of its Scope 1,2, and share of our scope 3 carbon
emissions. Starting March 2020, we will implement science based targets. 4. We will continue to collaborate with like-minded
organisations to drive change. In 2018, we co founded the Climate Leaders Coalition. 5. We will continue to provide input into
government policy. We did this earlier this year and gave support to the government’s consultation on the ‘Climate Change
Response (Zero Carbon) Amendment Bill’. We confirmed our full support of the Bill in its efforts to ‘give businesses confidence
to invest and innovate in existing and emerging low emissions technologies’. Earlier this year we also provided input in the
Government consultation on Product Stewardship and category priority areas, as well as on reports on Plastics New Zealand.