FMA publishes scenario analysis information
The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has released its scenario analysis information sheet to help climate reporting entities (CREs) meet their obligations under the Climate-Related Disclosures (CRD) regime.
Under the regime, CREs are required to undertake scenario analysis and disclose how the process was conducted in their annual climate statements.
The information sheet explains the FMA’s expectations for the scenario analysis disclosures set out in the External Reporting Board’s Aotearoa New Zealand Climate Standards.
Scenario analysis is a strategic tool where CREs construct plausible pathways leading to different future worlds (i.e. scenarios) and analyse how resilient their current business model and strategy would be if it was placed within these scenarios.
FMA Climate Related Disclosures Manager Jenika Phipps said: “We recognise that climate-related scenario analysis is a new concept for most entities in New Zealand.
“This information sheet explains scenario analysis as an important tool to develop an exploratory approach for considering significant uncertainties, about the scale and speed of physical and transitional climate-related impacts, that are likely to play out in the future”.
“Using climate-related scenario analysis will enable entities to better understand the inter-related dynamics of climate change, prepare for an uncertain future, and ultimately consider how to improve their long-term resilience”.
Scenario analysis forms part of the requirements under the strategy pillar of the CRD reporting regime. The other three pillars are risk management, governance, and metrics and data.
The information sheet follows the suite of CRD documents the FMA released in June.
