New Zealand’s early adoption of mandatory climate disclosures, evolving stance on methane emissions and increasing ESG litigation provide important lessons for other jurisdictions, says Hannah Bain, special counsel and head of Russell McVeagh’s climate change practice.
As a small island nation at the bottom of the world, New Zealand’s approach to environmental, social and governance (ESG) issues may not appear at first blush to hold much weight on the world stage. While New Zealand’s approach to sustainability regulation has generally been fragmented and reactive to overseas trends, early progress in key areas such as mandatory climate-related disclosures means that insights may be drawn from the New Zealand example.
Other features of New Zealand’s geography, politics and economy have also influenced its approach to ESG regulation, with potential lessons for overseas jurisdictions. For example, New Zealand’s approach to biogenic methane reflects both the importance of agriculture to the economy and the large percentage of biogenic methane emissions, with ongoing reform in this area. In addition, extreme weather events in 2024 have cast a spotlight on the need to put in place a cohesive and durable framework for climate adaptation.
While New Zealand enjoys an overarching climate change legislative framework that passed with cross-party political support, it is not immune from the politicisation of ESG issues, with the three-year political cycle proving particularly challenging for implementing long-lasting solutions. It is accordingly critical for businesses, communities and other stakeholders to work closely with government agencies to drive policymaking that will stand the test of time.
In this article, we provide an overview of five key trends in ESG law and policy in New Zealand and lessons that can be drawn for the rest of the world as we enter the second half of this critical decade.
Substantial progress on climate-related disclosures, with more to do
New Zealand’s mandatory climate-related disclosures regime came into effect for financial years beginning on or after 1 January 2023, with the first reports for most captured entities released in 2024. Under this regime, organisations are required to prepare and publish climate statements that comply with climate standards issued by the External Reporting Board (XRB).
From an international perspective, it is worth noting that New Zealand’s regime applies only to certain financial institutions, fund managers and listed issuers, meaning that large, non-financial, privately held companies are not currently captured. By contrast, Australia’s regime applies to a much broader range of entities.
The first year of reporting was not without challenges, with key pressures including resourcing issues, data availability challenges and the need to come to grips with key technical aspects of the regime. Adoption relief was available for some of the more difficult areas of disclosure in the first year, with some (but not all) of this relief extended for an additional year until the end of 2025. Importantly, 2025 is the first year in which entities will be required to disclose the transition plan aspects of their strategies, which is a key component of the regime.
While the regime has undoubtedly focused the minds of many organisations on the climate-related risks and opportunities for their businesses, some stakeholders are questioning whether certain settings are right – in particular, the automatic liability under the regime for directors, the length of disclosures compared with earlier voluntary climate-related disclosures reports, data issues and challenges associated with forward-looking statements. As such, the New Zealand government is currently considering options to amend the regime, including potential changes to director liability settings and reporting threshold changes.
Looking ahead, a key question is whether New Zealand’s regime should be aligned with overseas regimes. Because New Zealand was an early adopter of mandatory reporting, its climate standards were based on the recommendations of the Taskforce on Climate-related Disclosures rather than the standards developed by the International Sustainability Standards Board (ISSB). This means that many entities are now grappling with how to navigate multiple reporting standards in the context of cross-border businesses, following adoption of the ISSB standards by jurisdictions such as Australia. The XRB has recently closed consultation on the question of whether there would be value in aligning with international frameworks.
Separately, the XRB is planning to consult on differential reporting standards for different classes of entity, such as reduced disclosure requirements for smaller entities.
Climate change architecture remains stable, but the devil is in the detail
As noted, one advantage of New Zealand’s climate change response is that there is a settled legislative framework governing matters such as the setting of domestic emissions reduction targets and budgets and the process for preparing emissions reduction plans and national adaptation plans. New Zealand also has an independent Climate Change Commission, responsible for advising the government on matters relating to both mitigation and adaptation. These mechanisms are set out in New Zealand’s overarching piece of climate change legislation, the Climate Change Response Act 2002 (CCR Act).
Outside of the overarching architecture in the CCR Act, however, there remains considerable distance between the climate policies of New Zealand’s two major political parties. In addition, New Zealand’s mixed-member proportional electoral system means that minority parties have had a considerable influence on climate policy as part of Coalition or other inter-party arrangements.
Under the prior government, the Labour and Green parties generally took a relatively interventionist approach to climate change and ESG issues, with a range of regulatory reforms implemented or proposed, alongside direct policy interventions. These included substantial reform of the New Zealand Emissions Trading Scheme (ETS); reforming the resource management system; banning new oil and gas exploration; planning to price agricultural emissions; and direct subsidies for clean cars and large corporate emissions reduction programmes.
Following the 2023 general election, the National Party-led coalition government moved swiftly to implement a revised emissions reduction approach, pivoting away from direct interventions to emphasise areas such as mobilisation of private finance, viewing the ETS as the primary emissions reduction tool and removing regulatory barriers to support the energy transition. The ban on new oil and gas exploration is being repealed and resource management reform has been largely unwound (although alternative reforms are underway).
Outside of core climate policy, some politicians have been leveraging the Members’ Bill process to introduce proposed legislation that pushes back on aspects of ESG. One recent example is the Financial Markets (Conduct of Institutions) Amendment (Duty to Provide Financial Services) Amendment Bill (colloquially referred to as the “Woke Banking Bill”), which endeavours to prevent banks withdrawing services from customers for non-commercial reasons such as “murky ‘environmental, social or governance’ moralising”.
From a global perspective, the New Zealand experience highlights the need for political parties to work together on designing and implementing ESG-related laws and policies. New Zealand’s overarching climate change legislation enjoys relative stability because of the hard work of political parties to build cross-party consensus. By contrast, frequent changes to New Zealand’s detailed climate policies create significant challenges for organisations, individuals and other stakeholders looking for policy certainty in the face of an uncertain future.
One area where cross-party collaboration will hopefully be on display is in the development of a climate change adaptation framework for New Zealand. While there is broad cross-party consensus that legislation is needed to deal with climate adaptation (including the vexed question of “who pays?”), to date the complexity of the issue has stalled progress. However, following a Select Committee inquiry into adaptation, 2025 has seen the release of recommendations for a proposed adaptation approach from an Independent Reference Group on Climate Adaptation. These recommendations are now being considered by the Minister of Climate Change and will potentially shape the design of New Zealand’s adaptation framework.
Tackling the methane challenge
Methane presents a particularly difficult challenge for New Zealand’s climate change response. Specifically, and unlike most other developed countries, biogenic methane associated with ruminant animals makes up almost half of New Zealand’s emissions profile, but agriculture contributes around 70% of New Zealand’s total export revenue. Accordingly, while a comprehensive approach to emissions reductions must take methane into account, agriculture’s critical role in the economy means that there are economic risks associated with rapid reductions in methane emissions.
To date, New Zealand has taken a “split gas” approach to the domestic emissions reduction targets enshrined in the CCR Act, with one “net zero by 2050” target for all gases other than biogenic methane, and a separate biogenic methane target of a 10% reduction against 2017 levels by 2030 and a 24-47% reduction by 2050.
While the Climate Change Commission recommended strengthening the methane target, the government commissioned a report to identify what a 2050 biogenic methane target would look like based on the principle of “no additional warming” (reflecting methane’s characteristics as a short-lived gas). This report concluded that, in the absence of rapid reductions in global methane emissions, reductions of around 14-15% by 2050 from 2017 are sufficient to keep warming from New Zealand’s biogenic methane at or below 2017 levels. As such, the government may move to implement a weakened methane target for New Zealand.
In addition, while the previous government had planned to price emissions from agricultural methane in the ETS from 2025, the current government has reversed those plans and instead plans to develop a separate pricing system for on-farm emissions by 2030.
It is worth noting that New Zealand is also focusing on technological solutions to the methane problem. For example, AgriZero is a public-private partnership that invests in projects relating to reductions in biogenic methane, such as feed additives and vaccines.
The ‘S’ in ESG – will New Zealand implement a modern slavery regime?
While the previous government announced plans to establish a modern slavery legislative regime, this was deprioritised following the 2023 general election. An expert group drafted an anti-slavery bill in late 2024, hoping that it would receive support from MPs. National MP Greg Fleming delivered this support, entering the Modern Slavery Reporting Bill (based on the expert groups’ bill, with some amendments) into the ballot as a Member’s Bill. The intention is that the new legislation will go some narrow the gap between New Zealand and overseas counterparts (such as Australia) with modern slavery frameworks already in place.
The bill is focused on disclosure of certain matters relating to modern slavery rather than the imposition of substantive requirements. It requires ‘reporting entities’ to prepare and publish an annual ‘modern slavery statement’ on their websites and submit them to a publicly searchable register established by the bill. The bill’s wide definition of ‘reporting entity’ would capture most public and private sector entities with more than $50 million in consolidated revenue operating in New Zealand, overseas companies carrying on business in New Zealand, and entities with direct or indirect control of a New Zealand entity or overseas company carrying on business in New Zealand.
ESG-related litigation remains on the rise
Consistent with other jurisdictions, New Zealand is seeing an increase in the number of proceedings involving ESG issues. In many cases, these cases appear to have strategic intentions to influence future corporate and public-sector decision-making on ESG issues.
Last year was particularly significant for New Zealand ESG litigation, with the Supreme Court’s decision in February to allow the tort claim in Smith v Fonterra to proceed to trial attracting international attention. This decision leaves open the possibility of corporates facing tort-based liability in New Zealand in respect of damage caused by greenhouse gas emissions produced by their activities and therefore has potential precedent value beyond New Zealand’s shores.
Several other significant decisions are either before the courts or awaiting judgment. For example, a significant greenwashing case against a fossil fuel company is currently proceeding through the High Court (Lawyers for Climate Action New Zealand Incorporated v Z Energy), and a claim has been brought in relation to the labelling of butter products as ‘grass-fed’ (Greenpeace v Fonterra). While New Zealand has historically seen some regulatory enforcement in relation to greenwashing at the product level, there has been less focus on entity level claims (such as ‘net zero’ and ‘carbon neutral’ claims). However, New Zealand’s consumer law regulators are sharpening their focus in this area.
In the public law space, successive governments have faced a stream of judicial review challenges, including (most recently) a claim challenging the current government’s ‘net’ approach to emissions reduction in emissions reduction plans under the CCR Act (Lawyers for Climate Action New Zealand Incorporated v Minister for Climate Change (2025)). This latest case reinforces that public decision-makers should continue to expect scrutiny where they are exercising powers relating to climate change, whether or not any judicial review challenge ultimately succeeds.
We would expect governments both in New Zealand and internationally to continue to face challenges to the processes through which they have arrived at particular climate policies, as distinct from the substance of the policies themselves. Typically, governments will have a level of discretion over substantive policy choices, but processes for reaching them are often mandated by primary legislation, with the result that they are generally more straightforward to challenge by way of judicial review.