The bill will requires financial firms to explain how they would manage climate-related risks and opportunities.

A group gathers on Flagstaff Hill for the Sunrise Movement's Rally & March for Climate Justice, in Pittsburgh, USA, March 19, 2021.
A group gathers on Flagstaff Hill for the Sunrise Movement's Rally & March for Climate Justice, in Pittsburgh, USA, March 19, 2021. (AP)

New Zealand will force banks to reveal the impact their investments have on climate change under world-first legislation intended to make the financial sector's environmental record transparent, officials have said.

All banks with total assets of more than NZ$1 billion ($703 million), insurers with more than NZ$1 billion in total assets under management, and all equity and debt issuers listed on the country's stock exchange will have to make disclosures.

Commerce Minister David Clark said the law would make climate reporting mandatory for banks, insurance companies and investment firms.

"Becoming the first country in the world to introduce a law like this means we have an opportunity to show real leadership and pave the way for other countries to make climate-related disclosures mandatory," he said.

Clark said it would force financial institutions to consider the real-world impact their investments have on the climate and allow the public to gauge their performance.

"It is important that every part of New Zealand's economy is helping us cut emissions and transition to a low-carbon future," he said.

"This legislation ensures that financial organisations disclose and ultimately take action against climate-related risks and opportunities."

READ MORE: China risks losing gains on climate change due to bitcoin mining rush

Lowering carbon emission

Around 200 of the country's biggest companies and several foreign firms that meet the NZ$1 billion threshold will come under the legislation.

Disclosures will be required for financial years beginning next year once the law is passed, meaning that the first reports will be made by companies in 2023.

Shaw said the annual reports were likely to underline the fact that high-carbon investments would become less attractive as measures to curb emissions took hold.

"We simply cannot get to net-zero carbon emissions by 2050 unless the financial sector knows what impact their investments are having on the climate," he said.

"This law will bring climate risks and resilience into the heart of financial and business decision making."

The New Zealand government last September said it would make the financial sector report on climate risks and those unable to disclose would have to explain their reasons.

Prime Minister Jacinda Ardern, who returned to power last October delivering the biggest election victory for her centre-left Labour Party in half a century, had called climate change the "nuclear free moment of our generation."

Ardern has committed the South Pacific nation to becoming carbon neutral by 2050 and generating all its energy from renewable sources by 2035.

READ MORE: Climate change driving marine species towards poles

Source: TRTWorld and agencies