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Investor News Wrap: October 2021

Page last updated: 01 November 2021

News from the month that Kiwi investors should know, including new financial regulations, fraud and scams, research, reports and offshore developments.

NZ leads world with climate disclosure law

New Zealand has become the first country to pass a law that makes larger financial organisations disclose their climate-related risks, including listed companies and fund managers.

Under the Climate-related Disclosures Bill, around 200 entities will be required to produce annual climate statements that identify and report on the impact of climate change on their organisation, and disclose their greenhouse gas emissions.

Those 200 entities will include bigger companies that are listed and issue shares and bonds in NZ, fund managers including KiwiSaver, plus the big banks and insurers.

The FMA will monitor and enforce the new regime, the aim of which is to ensure the effects of climate change are routinely considered in financial decision-making.

Bank of England voices crypto concerns

A Bank of England boss has warned crypto-assets could pose a risk to global financial stability due to their rapid growth, volatility, and emerging connections with the traditional financial system.

Deputy Governor Sir Jon Cunliffe said in a speech that the worldwide crypto market had grown by 200% in 2021 alone, to $2.3 trillion, having been worth just $16 billion five years ago.

"The bulk of these assets have no intrinsic value and are vulnerable to major price corrections," he said. "The crypto world is beginning to connect to the traditional financial system and we are seeing the emergence of leveraged players. And, crucially, this is happening in largely unregulated space."

"[The] risks currently are relatively limited but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace. How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities."

Investors urged to scrutinise advertising

Kiwis need to be wary of adverts that talk up investment returns but downplay the risks, the FMA warned in October, after issuing new advertising guidelines to the industry.

The guidance focuses on ‘fair dealing’ provisions that prohibit misleading or deceptive conduct, and false, misleading or unsubstantiated claims – even if the promoter didn’t intend to deceive.

The FMA urged investors to scrutinise financial ads for what they say about risk, particularly high-risk investments; what’s promised about returns, and the rationale for any specific claims; and if the ad presents a balanced view of the investment or leaves out key details.

Inflation pressures mount

Annual inflation was 4.9% in the year to September, the biggest annual movement in a decade, according to Stats NZ.

The main drivers were housing-related expenses such as construction costs and local authority rates, with new build costs rising 12% for the year.

At the same time, the value of goods imports rose 30% year-on-year, to $6.6 billion, well in excess of trade exports valued at $4.4 billion, resulting in a record $2.2 billion trade deficit in September.

Stats NZ said the record value of imports reflected the higher prices Kiwis are paying for consumer goods, and strong demand for capital goods such as construction machinery and passenger vehicles.