In its proactively released Regulatory Impact Statement, MBIE said the compliance savings for insurers were unlikely to outweigh the broader costs of reduced transparency. It warned that further shrinking the reporting pool could undermine the regime's comparability, market confidence and ability to assess climate-related risks across the financial system.

MBIE said exempting health and life insurers would not create any additional direct costs for insurers, regulators or investors, but would reduce the climate-related information available to investors, regulators and the companies themselves.

In announcing the change last month, the Government said it was removing health and life insurers from the regime because the sector was not directly exposed to climate-related risks such as extreme weather events in the same way as general insurers.

The change will reduce the number of organisations required to report under the regime from 164 to about 67, removing nine health and life insurers, with 88 entities - more than half - already exempted through reforms announced last year.

While the initial reforms were hailed as Christmas coming early for those exempted from the scheme, critics lamented "gutting" the scheme, which was called world-leading when it was introduced by the Labour-Greens Government in 2021, arguing it could leave New Zealand with major blind spots in tracking climate risk.

The law was originally aimed at making climate risk a normal part of business, investment and lending decisions by moving it out of sustainability reports and into mainstream accounting.

Savings don't outweigh costs

Ministry officials warned that further reducing the number of reporting entities could weaken the integrity and effectiveness of the climate-related disclosures regime, which relies on a broad reporting base to support comparability, market confidence and the assessment of climate-related risks and opportunities.

“There is a risk that additional reductions in the reporting population could erode confidence in the regime as a whole and limit its ability to achieve its intended system‑level objectives.

“The CRD framework relies on maintaining a broad reporting base to support comparability, market confidence, and system‑wide assessment of climate‑related risks. Further reducing the number of climate‑reporting entities, particularly ahead of observing the effects of the already agreed changes to reporting numbers, creates a risk of weakening the regime’s overall integrity.”

MBIE estimated the changes would save each of the nine affected health and life insurers between about $261,500 and $600,000 in compliance costs.

However, the Regulatory Impact Statement said those savings were unlikely to outweigh the broader, non-financial costs.

It found there was insufficient evidence that compliance costs exceeded the intended benefits of the regime and warned the exemptions would reduce the availability of climate-related information for both the insurers and the wider market, while further weakening the climate-related disclosures framework.

“While there may be some compliance relief for the entities excluded, we do not think there is evidence that the costs of compliance outweigh the intended benefits of the regime.”

MBIE’s preferred option was to retain health and life insurers within the regime, saying a sufficiently broad reporting base was needed to preserve the integrity and comparability of climate disclosures and provide meaningful system-wide insights into climate-related risks.

It said keeping the sector within the scheme, alongside guidance to ensure reporting remained proportionate and focused on material risks, would support the regime’s long-term effectiveness.

“The CRD framework relies on having sufficient reporting entities to provide meaningful system-level insights into climate-related risks. Maintaining this group in scope, combined with guidance to ensure reporting is proportionate and material, supports the overall effectiveness and durability of the regime.”

Questions over disclosure effectiveness

Victoria University of Wellington researcher Hang Pham said New Zealand's climate disclosure regime may be unintentionally encouraging "greenhushing" – where organisations stay silent about their climate commitments for fear of scrutiny or accusations of greenwashing.

Pham said the trend raises broader questions about whether mandatory climate disclosures are genuinely influencing financial decision-making or simply becoming cautious compliance exercises with limited real-world impact.

Global shift

New Zealand is not alone in revising its climate disclosure framework. Australia is also proposing to narrow the scope of its regime by raising the financial thresholds that determine which companies must report, although its disclosure requirements will remain significantly broader than New Zealand's.

The United States has taken a more dramatic approach, with the federal government moving to scrap its climate disclosure rules altogether.

Meanwhile, a recent report says that disclosing climate risks and impacts gives Canadian companies an edge with European investors.