Natural hazards including climate change directly cost central government and insurers more than $4 billion a year, the Climate Change Commission reported in its second progress review of the National Adaptation Plan. That’s just the direct tab — it leaves out the economic activity lost when storms hit, the community displacement, the strain on people’s health. The Commission’s August 2026 assessment found the country’s adaptation efforts have not kept pace with the increasing risk. Here’s what you actually need to know.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The Commission’s report identifies four areas where progress has stalled: funding and financing pathways for local adaptation, legislative requirements for adaptation planning, embedding climate change into key legislation, and building a coordinated national climate risk information system. The next National Adaptation Plan isn’t due until 2028, but the Commission is clear — waiting isn’t an option.
Climate Change Minister Simon Watts has already signalled that property owners shouldn’t expect government bailouts for climate-related losses, with safety nets like those provided after the 2023 Auckland and Hawke’s Bay floods likely to largely disappear over the next 10 to 15 years. For businesses, that shifts the calculus entirely. The role of consensus in New Zealand business decisions takes on a different weight when the government is stepping back from underwriting climate risk.
The Real Cost of Slow Adaptation
The $4 billion annual figure from the Commission doesn’t capture the full picture. That’s just what central government and insurers pay directly. The indirect costs — lost production, supply chain disruptions, damaged infrastructure, community displacement — multiply that number substantially. For businesses, the gap between what’s coming and what’s being prepared for is where the real risk sits.
DLA Piper’s analysis of the regulatory landscape notes that the Climate Change Response (Tort Liability) Amendment Act 2026 received Royal Assent on 24 August 2026, effectively ending the landmark Smith v Fonterra climate tort claim. That legislation bars courts from imposing tort liability for emissions-related climate change effects. But the broader trend is toward more litigation, not less. The same quarter saw New Zealand’s largest AML/CFT penalty — ASB fined $6.7 million for breaches under the AML/CFT Act — and a $135.6 million class action settlement against ASB for CCCFA disclosure breaches.
The litigation and regulatory quarterly brief from DLA Piper also highlights the High Court’s decision in Nazzal v Guardians of New Zealand Superannuation, which found the Guardians’ ethical investment policies unreasonable and unlawful. The court didn’t order divestment but required the framework to be revised — a signal that statutory investment duties face closer judicial scrutiny.
For SMEs, the pressure is more immediate. Andersen’s 2026 Business Risk & Resilience report notes that businesses with turnover between $5 million and $20 million are particularly exposed to the macro factors squeezing margins. Rising operational costs from labour, utilities, supply chain and compliance requirements are hitting hard, and the NZD exchange rate remains unfavourable against the USD. Liquidators are forecasting company failures to continue into mid-2026, with a full recovery of the macro economy likely to take the rest of the year and beyond.
Where Businesses Get Tripped Up
The research points to several common gaps in how businesses are responding to the shifting regulatory environment. These aren’t hypothetical — they’re showing up in enforcement actions, court decisions, and the Commission’s findings.
Treating Compliance as a One-Time Cost
Regulatory change in New Zealand isn’t slowing down. The AML/CFT regime has a new sole supervisor in the DIA with new rule-making powers. The FMA has taken over CCCFA supervision. The XRB is consulting on a new climate reporting standard, NZ IFRS S2, based on the global IFRS S2 framework, with consultation closing 30 September 2026. Businesses that treat compliance as a fixed annual expense rather than an ongoing operational cost are the ones that end up in the enforcement headlines — like the $2.8 million penalty against BNZ for misleading customers on interest calculations, or the $2.1 million enforceable undertaking against FMG for misleading insurance representations.
Assuming Government Will Step In After a Disaster
Minister Watts has been direct: homeowners and property owners should not expect to be bailed out. The safety nets that followed the 2023 floods are likely to largely disappear over the next 10 to 15 years. For businesses with physical assets in flood-prone or hazard-prone areas, that changes the risk equation entirely. The environmental and regulatory legislative update from DLA Piper notes that the Fast-track Approvals Act 2024 doesn’t require climate risks or adaptation outcomes to be considered, creating a risk that new developments lock in future vulnerability.
Underestimating Director and Officer Accountability
The Gibson appeal dismissal in March 2026 was a landmark: the first time a senior executive of a New Zealand company was convicted under section 44 of the Health and Safety at Work Act 2015 for failing to exercise due diligence. The High Court dismissed the appeal, confirming that officers in large, complex PCBUs can be held personally liable. Shareholder activism is also becoming more common, as DLA Piper notes, and boards should treat it as an ongoing governance challenge rather than a one-off event.
Ignoring the Cashflow Implications of Regulatory Change
Andersen’s report flags that many SMEs are reporting rising operational costs from compliance requirements. With tight margins and smaller cash buffers, unexpected compliance costs can destabilise growth. The report’s advice is blunt: cash remains king, and working capital headroom is the phrase for 2026. Businesses that haven’t stress-tested their cashflow against regulatory shocks are carrying more risk than they realise.
Building Resilience Into Your Operation
The research offers a reasonably clear picture of what businesses should be doing, even if the regulatory framework itself is still catching up. Here’s where the focus needs to be.
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| Legislation / Reform | Status | Key Business Impact |
|---|---|---|
| Climate Change Response (Tort Liability) Amendment Act 2026 | Royal Assent 24 Aug 2026 | Bars climate tort claims; ends Smith v Fonterra |
| Climate Change Response Amendment Bill | Introduced 15 Jul 2026 | Will require councils to prepare adaptation plans for priority areas |
| Building Amendment Bill | First Reading 30 Jun 2026 | Introduces proportionate liability for defective building work |
| Modern Slavery Bill | Select committee report due 31 Aug 2026 | New supply chain due diligence reporting obligations |
| AML/CFT reforms | In force 1 Jul 2026 | DIA sole supervisor; new enforceable rules on due diligence |
| FMA CCCFA supervision | From 1 Jul 2026 | FMA now regulates credit contracts and consumer finance |
Get Ahead of Climate Reporting Obligations
The XRB’s draft climate reporting roadmap proposes a new standard aligned with the global IFRS S2 framework. Even if your business isn’t directly captured by climate reporting requirements yet, your supply chain partners or lenders may be. Understanding what data you’ll need — and starting to collect it now — avoids a scramble later. The FMA’s third climate disclosures insights report, based on a review of 62 climate statements, found improvements in reporting structure and governance but identified ongoing gaps including incomplete filings and limited detail on offset use. The bar is rising.
Review Your Contractual Protections
DLA Piper’s guidance on force majeure, material adverse change clauses, and frustration under New Zealand law is worth a close read. With fuel-driven cost and delay risks affecting construction contracts, and global supply chains still volatile, standard contracts may not provide the protection you assume. The return to Just-in-Time inventory practices is likely some time away, as Andersen notes, and the full impact of tariff changes hasn’t been felt yet. The impact of economic cycles on business stability in NZ means that contract terms negotiated in stable conditions may not hold up under stress.
Build a Realistic Cashflow Buffer
Andersen recommends maintaining sufficient working capital to cover at least 4-6 months of operations, particularly for businesses with seasonal demand. That’s a higher bar than many SMEs are used to, but the combination of regulatory change, supply chain volatility, and reduced government safety nets makes it prudent. Consider fixed-rate financing or alternative funding options to protect against rising borrowing costs, and match the life of assets with the life of the loan.
Strengthen Due Diligence Processes
The Gibson case makes clear that due diligence isn’t a box-ticking exercise. Officers need to demonstrate active, ongoing engagement with health and safety risks. The same principle applies across regulatory compliance — the FMA, Commerce Commission, and DIA are all showing a willingness to pursue penalties for failures that span years. A $2.48 million penalty against Co-operative Bank for CCCFA breaches spanning 2015 to 2021, or a $2.1 million penalty against ASB for multi-policy discount errors from 2014 to 2024, suggests that historical compliance gaps will be found and penalised.
Diversify Supply Chains and Markets
Andersen’s report emphasises building relationships with multiple suppliers, including local and regional options, to reduce reliance on any single source. For critical components, maintaining buffer inventory can absorb disruptions. On the revenue side, exploring export or alternative-market opportunities reduces dependence on domestic demand, which is expected to soften during the election period in late 2026.
Frequently Asked Questions
What is the Climate Change Response (Tort Liability) Amendment Act 2026? ▾
How long will government disaster bailouts continue? ▾
What are the new AML/CFT rules from July 2026? ▾
Does the Modern Slavery Bill affect my business? ▾
What is the XRB consulting on for climate reporting? ▾
Don’t Wait for the System to Catch Up
The Climate Change Commission’s message is blunt: the next two years provide a window to put the necessary systems in place before the next National Adaptation Plan in 2028. But for businesses, waiting for the regulatory framework to mature is a strategy that carries its own risks. The direction of travel is clear — tighter compliance, reduced government support, more litigation, and greater director accountability.
Andersen’s report puts it well: businesses that revive and thrive in 2026 will combine careful planning with agility, innovation, and a proactive approach to people, finance and technology. Treating risk management as a core business discipline rather than an afterthought is what separates the businesses that weather the volatility from those that don’t.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Excessive Licensing Fees Hurt New Zealand Businesses.
Sources and Further Reading
Word of Mouth Marketing Fails in New Zealand Businesses — Why traditional marketing assumptions don’t hold in the New Zealand market.
Climate Change Commission (2026). Second NAP Progress Report. 🔗
DLA Piper (2026). Litigation and Regulatory Quarterly Brief Q2 2026 — New Zealand. 🔗
DLA Piper (2026). New Zealand Environmental and Regulatory Legislative Update. 🔗
MinterEllison (2026). Climate Adaptation Not Keeping Pace: Four Areas Where New Zealand Must Accelerate. 🔗
PwC New Zealand (2026). Doing Business in New Zealand 2026. 🔗
Andersen New Zealand (2026). NZ SME Business Risk & Resilience 2026. 🔗
