Wellington, Oct 21 (IANS): New Zealand has become the first country in the world to pass a law that will ensure financial organisations to disclose and act on climate-related risks and opportunities, the government announced on Thursday.

The Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill has now passed its third reading. Once in effect, it is expected to make a significant contribution to New Zealand achieving carbon neutrality by 2050, reports Xinhua news agency.

"Financial services and markets play an important role in New Zealand's transition to a clean, green and carbon-neutral future," Commerce and Consumer Affairs Minister David Clark said.

"This Bill will require around 200 of the largest financial market participants in New Zealand to disclose clear, comparable and consistent information about the risks, and opportunities, climate change presents to their business. In doing so, it will promote business certainty, raise expectations, accelerate progress and create a level playing field," Clark said.

Climate Change Minister James Shaw said the legislation is one of a number of actions the New Zealand government is taking to meet its international obligations and achieve the 2050 emissions targets required by the Climate Change Response Act 2002.

"Climate-related disclosures will bring climate risks and resilience into the heart of financial and business decision making. It will encourage entities to become more sustainable by factoring the short, medium, and long-term effects of climate change into their business decisions.

"New Zealand is a world leader in this area and the first country in the world to introduce mandatory climate-related reporting for the financial sector. We have an opportunity to pave the way for other countries to make climate-related disclosures mandatory," Shaw said.

Once passed, disclosures will be required for financial years beginning in 2023, subject to the publication of climate standards from New Zealand's independent accounting standard setter, the External Reporting Board (XRB).

The XRB climate standards will be based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on governance, risk management, strategy, and metrics and targets.

The Board released its first consultation document focusing on governance and risk management for the proposed climate-related disclosure reporting standards on October 20.

Consultation on the standards for strategy, and metrics and targets will follow.