Meridian Energy : submission - Climate related Disclosures (Strategy and Metrics and Targets) - April 2022

28 April 2022

Strategy, and Metrics and Targets Consultation External Reporting Board

By email:[e-mail]

Climate-related Disclosures: Strategy, and Metrics and Targets

Meridian welcomes the opportunity to comment on the Strategy, and Metrics and Targets consultation document of the proposed standard, Aotearoa New Zealand Climate Standard 1: Climate-related Disclosures (NZ CS 1). Responses to the XRB's specific consultation questions are included in Appendix A of this submission.

Our experiences so far in climate reporting

Meridian has been an early and enthusiastic adopter of climate and sustainability reporting, now preparing a fourth annual voluntary Climate-Related Disclosure (CRD) aligned with Task Force on Climate-Related Financial Disclosures (TCFD) guidance. Climate action is central to our purpose and business strategy. Meridian believes in the value of being transparent and proactive about the climate impacts on our business. Our voluntary climate-related disclosures and supporting processes have played a key role in this and we strive to make year on year improvements to our underlying processes and the quality of our external disclosures for primary users.

Meridian supports the indicative direction of travel

We are pleased to see the relatively large alignment between indicative NZ CS 1 requirements in this consultation, and that of existing global frameworks - the "comparison tables" of XRB proposed disclosures for Strategy and Metrics and Targets against TCFD Recommendations and TRWG Prototype, were very useful.

Meridian Energy Limited	Level 2, 55 Lady Elizabeth Lane	Phone [phone]
PO Box 10-840	Fax [phone]
Wellington 6143	www.meridianenergy.co.nz
New Zealand

Primary users of these disclosures will be unique to reporting entities but many, including Meridian, will have primary users from around the world. Therefore, we continue to support the close alignment of NZ CS 1 with existing best practice global frameworks to enable reasonable comparability for disclosure users. Our strong preference is to not be required to prepare multiple different disclosures on the same topic. It is clear the XRB are taking prudent steps to evaluate global references and we strongly support this continued diligence.

At a high level, Meridian views the balance struck between principles-based and prescriptive requirements as largely fair and commends the XRB for deliberate focus on this. Some minor examples exist where Meridian would support a review of the draft disclosure requirements, against the section objective, and consider if there is some unnecessary mandatory disclosure detail suggested that has the potential to create risks. For example, some elements of the scenario methodologies and assumptions disclosure expectations could risk mandating confidential and/or commercially sensitive information be disclosed (refer Appendix A, question response 1(c)).

Meridian supports a phased approach for compliance

Meridian is well placed to adopt all indicative NZ CS 1 provisions outlined in the subject consultation document, but recognises the degree of maturity that exists having voluntarily disclosed for the last three financial years. That said, Meridian supports the XRB's proposal of allowing first time adoption provisions to enable other organisations, who may be starting on this journey, to have a time-bound period to scale their Climate-Related Disclosure capability. Meridian's only suggestion on the XRB's proposed first-time adoption provisions relates to "first climate statement" provisions to allow for disclosing "progress towards" developing a transition plan. Meridian believes there is room to raise the requirements here and include the disclosure of a "transition roadmap" as a bridge to a plan in the second climate statement with targets / initiatives. A disclosure requirement of only "progress towards", could result in vague references that don't sufficiently demonstrate to a primary user that tangible and action-orientated planning is underway.

Conclusion

Meridian is highly supportive of mandatory Climate-Related Disclosures and will continue to voluntarily disclose for now and look forward to sharing our FY22 disclosure later in August. We would like to commend the XRB for leading this consultation and look forward to reviewing of the first NZ CS 1 exposure draft in the near future.

Nāku noa, nā

Tina Frew

Head of Sustainability

Appendix A: Responses to consultation questions

Question	Response
1. .	1Do you think the proposed Strategy section of NZ CS 1 meets primary user needs? a) Do you think that the information in this section of the standard will provide information that is useful to primary users for decision making? If not, please explain why not and identify any alternative proposals.	Yes overall, the proposed Strategy section will provide useful information for primary users. Note detailed feedback below on specific proposed elements.
b) Do you consider that this section of the standard is clear and unambiguous in terms of the information to be disclosed? If not, how could clarity be improved?	The articulation of sub paragraphs is clear. It could be useful to visually represent the disclosure requirements like the TCFD model (figure 3 in the consultation document) - to simplify the structure and avoid the need for cross referencing between sub paragraphs. Additionally, the first-time adoption provision 'example timeline' in figure 5 is a very helpful reference to clarify intent outlined in table 5 (where the table by itself, could leave room for confusion).
c) Do you consider that this section of the standard is adequately comprehensive and achieves the right balance between prescriptiveness and principles-based disclosures? If not, what should be removed or added to achieve a better balance?	The proposed Strategy disclosure section is very comprehensive. Meridian's only observation relates to the reasonable degree of "prescriptiveness" incorporated into Strategy section. Mandatory disclosure on some suggested details could either detract from achieving a simple, clear disclosure for primary users that meets the section objective, or potentially puts a CRE in a position where commercially sensitive information is considered mandatory to disclose. For example, the proposed requirement under the scenario methodologies and assumptions Table 3, paragraphs (7(a)(iii) and 7(a)(v) and 7(b)(iv)), has some risk of causing confidential and/or commercially sensitive information to be disclosed. Meridian would support reframing these disclosure paragraphs to ensure an expectation is

Meridian Energy Limited	Level 2, 55 Lady Elizabeth Lane	Phone [phone]
PO Box 10-840	Fax [phone]
Wellington 6143	www.meridianenergy.co.nz

New Zealand

not mandated that puts a CRE in a position of disclosing information which results in realisation of any of the risks outlined above.
2. .	2Do you agree that a standalone disclosure describing the entity's business model and strategy is necessary? Why or why not?	Meridian believes it is helpful but not necessary to have a standalone disclosure on business model and strategy. The process of assessing and disclosing climate impacts on a materiality basis, as well as disclosing a transition plan should clearly highlight any business model and/or strategic impacts. For example, supply and or demand for a CREs core product could be the fundamental and primary opportunity or risk for a business (which business model and/or strategy articulation might not explicitly highlight). However, the proposed disclosure is not arduous and allowing cross-referencing to other existing CRE public disclosures, makes this a minor point.
3.	Do you agree that we should not prescribe which global mean temperature increase scenario(s) should be used to explore higher physical risk scenarios (such as 2.7°C and/or 3.3°C or by using Representative Concentration Pathways (RCP) such as RCP4.5 or 6), but rather leave this more open by requiring a 'greater than 2°C scenario'? Why or why not?	Yes. Scenarios are intended to be plausible and distinct futures relevant to an organisation and used to assess a range of potential outcomes, rather than forecasts. Provided a CRE can outline/disclose why selected scenarios meet that intent, Meridian does not see a need to prescribe which global mean temperature increase scenario(s) should be used.
4.	We do not require transition plans to be tied to any particular target such as net zero and/or 1.5°C, but that entities will be free to disclose this if they have done so. Do you agree? Why or why not?	Meridian strongly supports the mandatory disclosure of transition plans and strives to advance a strategy and climate opportunities that enable a 1.5 deg C future. As much as Meridian would strongly support all organisations aligning a transition plan to a 1.5 deg C future - Meridian does not believe it is the purpose of the XRB to mandate that. Including in NZ CS 1 the requirement to disclose which target a CRE has chosen, and why that is appropriate, is fair and it is up to a primary user to determine if that CRE's ambition, is aligned with a future the primary user may want to enable the financing of.

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Meridian Submission - XRB Climate-related Disclosures: Strategy and Metrics and Targets Consultation - April 2022