The New Zealand parliament is in the process of debating a bill aimed at preventing banks from refusing their services to businesses on ESG grounds.
A right-wing New Zealand parliamentary party introduced the bill on 10 February.
Winston Peters, the leader of New Zealand First, said the bill ensures “fairness” and “prevents ESG standards from perpetuating woke ideology in the banking sector being driven by unelected, globalist, climate radicals”.
New Zealand First holds eight seats in parliament, making it the second-smallest party. The coalition government is led by the centre-right National Party, which holds 49 seats.
The bill – which is being led by New Zealand First MP Andy Foster – would amend the country’s 2022 Financial Market Amendment Act.
It states that the amendment is intended to prevent registered banks “de-banking” or withdrawing banking services from New Zealanders whose political views or outlook “may not align with the sensibilities” of that institution.
“This includes the withdrawal or refusal to provide banking facilities and services from businesses on murky ESG moralising,” it states, adding that the amendment extends protection from de-banking to industries that ESG rules deem to be “undesirable”.
The bill specifies that a financial institution must not withdraw or refuse to provide financial services “except for commercial reasons”.
This would mean not treating customers “less favourably” for any direct or indirect ESG consideration, including disclosing in line with any climate-related reporting standard issued by the External Reporting Board (XRB).
New Zealand’s climate and assurance standards came into force last year when the first round of mandatory corporate climate-related disclosures took place, following the issuance of the standards in December 2022.
The XRB declined to comment on the explicit mention of its standards in the bill.
Bill reactions
ESG lawyer Daniel Street said he would be “very surprised” if the bill gets past the first reading, but added that the debate about access to banking services and the role of the market in responding to climate change will continue “here and overseas”.
Separately, Dean Hegarty, co-CEO of Responsible Investment Association Australasia (RIAA), told Responsible Investor that the bill raises “alarming concerns” regarding New Zealand First’s understanding of ESG factors as a risk assessment.
“Banks lending on long-term contracts, like institutional investors who are investing for long-term return, need to consider long-term risks, including climate change and biodiversity loss. The business case for this is clear and ignoring these risks would be poor financial management,” he said.
Hegarty said the “overwhelming majority” of assets being managed in New Zealand are already factoring ESG considerations into their decision making.
Like Street, he thinks it unlikely the bill will be passed, but said hopefully the debate will highlight that, despite the use of “overly emotive and inflammatory language that tries to colour this as being more remarkable than it actually is, this is exactly the basic risk assessment we expect from our financial institutions”.
A parliamentary inquiry into banking competition in New Zealand was separately launched in August.
As part of the investigation, the committee is looking at how climate-related disclosures can impact competition and efficient access to lending, as well as whether bank environmental and sustainability policies have or could result in further increases in lending rates to the agriculture and horticulture sectors.
RI understands that part of this work involved reviewing banks’ membership of the New Zealand Banking Association.
Roger Beaumont, the association’s chief executive, told RI that it would “make sense” for the committee to include its enquiry before progressing the bill.
“Banks make lending decisions on a case-by-case basis taking into account their credit policies and risk appetite, which will vary from bank to bank,” he said. “Banks must also comply with many regulatory obligations. If a bank can lend within its credit risk policy and regulatory obligations, it likely will. That is the business of banking.”