IoD welcomes climate reporting reform that removes personal liability for directors

Removing the personal liability from directors for climate change statements has been welcomed by the Institute of Directors (IoD) in New Zealand. 

Commerce and Consumer Affairs Minister Scott Simpson today announced changes to climate reporting requirements aimed at supporting growth in New Zealand’s capital markets. Under the proposed changes, which are part of a broader reform package designed to make the regime more proportionate, workable and aligned with international practice:

• • Directors will no longer have personal responsibility (deemed liability) if their company breaches climate reporting rules
  • Directors and companies will remain liable for misleading or deceptive conduct or false or misleading statements

“In our submission on the capital markets reform proposals, we strongly supported mandatory climate reporting and are pleased to see this will continue. It is vital for a sustainable future and as a tool to support climate action,” says IoD Chief Executive Kirsten Patterson.

“However, the original reporting regime placed disproportionate liability on directors for forward-looking information that is inherently uncertain.” 

Feedback from IoD members was that, while directors supported the intent of the regime, concerns over personal liability, including potentially criminal penalties and the difficulty of verifying future climate impacts, had the unintended effect of limiting disclosure rather than encouraging it.

“It was a big ask of New Zealand directors to attempt to predict accurately the impacts of climate change on their organisations, and risk personal liability for those predictions,” says Patterson.

“The Government’s decision to remove personal liability is a welcome and pragmatic change. From a governance perspective, this adjustment restores the balance between accountability and practicality. It will enable directors to focus on ensuring robust governance processes, risk oversight and strategic responses to climate change, rather than on managing personal exposure.

“The changes announced by the Minister are sensible and reflect the experience of the first round of our climate reporting regime. They will encourage organisations to be more open about their expectations for climate change impacts than boards might otherwise have been comfortable with.”

The IoD is proud to host Chapter Zero New Zealand, the national chapter of the global Climate Governance Initiative. This organisation aims to equip directors with the knowledge and tools to make climate-smart decisions, supporting New Zealand’s climate change goals and the mandatory climate reporting regime. 

“Chapter Zero is open to all directors, not just members of the IoD. If New Zealand is going to navigate the challenges of climate change – as organisations, businesses and communities – all directors will need to increase their knowledge and understanding of the issues and stay up to date on the science, global practices and innovations that can improve climate governance. Chapter Zero provides an opportunity to tap into global knowledge and adapt it to our local needs,” says Patterson.

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