Most of us are familiar with the concept of greenwashing: organisations exaggerating or overstating their environmental credentials.

But in New Zealand, there are signs the country’s climate disclosure regime may inadvertently be driving a very different trend: not saying much at all.

“Greenhushing” describes organisations deliberately staying quiet about climate commitments, targets or initiatives for fear of scrutiny, criticism or accusations of greenwashing.

This tension has emerged clearly in my ongoing research on the disclosure regime, under which dozens of large companies and financial institutions are required to report on climate-related risks and strategy.

One sustainable investment analyst at a large financial institution said the organisation had become “a little quieter” about climate initiatives over worries about greenwashing. This is somewhat ironic, given a key aim of the world-first framework was to improve transparency.

It also points to a deeper question: are climate disclosures genuinely influencing financial decisions, or are they at risk of becoming cautious compliance exercises detached from real-world outcomes?

How organisations model climate risk

All of this comes at a time when the coalition government has been softening the reporting regime.

When introduced into law in 2021, it applied to around 170 to 200 entities. Last year, the reporting threshold was raised to organisations with assets exceeding NZ$1 billion, removing disclosure requirements for more than half those previously covered.

Unsurprisingly, that has drawn concern and condemnation from climate advocates. But requiring disclosures is one thing; getting organisations to meaningfully act on them is another.

My research suggests much of this goes back to how they are evaluating the climate risks they must report on.

Under the regime, reporting entities must undertake “climate scenario analysis”, assessing how different climate futures could affect their businesses over coming decades.

This includes both physical risks, such as storms, floods and sea-level rise, and transition risks linked to policy changes, technological shifts and the move toward a lower-emissions economy.

The External Reporting Board, the independent Crown entity that sets the reporting standards, encourages reporting entities to model several possible futures. These include optimistic emissions pathways aligned with limiting warming to 1.5C above pre-industrial levels, through to high-emissions scenarios that come with greater warming.

But climate scenario analysis is inherently uncertain. For instance, global temperatures have already temporarily exceeded the 1.5C threshold, raising doubts about whether some low-emissions pathways still provide a realistic basis for assessing future risk.

Most New Zealand banks now rely on shared climate scenarios – standardised models of possible future climate and economic conditions – while insurers and fund managers often use similar guidance frameworks. This helps reduce costs, improve consistency and build capability across the sector.

Yet even with these commonly used frameworks, the dynamic and long-term nature of climate risk makes it difficult to translate climate modelling into concrete lending or investment decisions.

A culture of caution

For organisations moving to address climate risk, some actions are easier to implement and communicate than others. Some financial institutions, for instance, have taken straight-forward measures such as adopting sustainable finance targets or placing restrictions on lending related to fossil fuels.

But amid uncertainty, most New Zealand financial institutions remain at an early stage of embedding climate risk into core credit policy. Tools such as lending limits for high-emissions activities or portfolio restrictions based on climate exposure remain relatively uncommon.

All the while, organisations reporting climate risk must meet independent assurance requirements intended to improve credibility and reduce greenwashing.

This means that organisations are not only navigating the complexity and uncertainty inherent in scenario analysis, they are also scrutinised for how they publicly discuss initiatives.

The result may be a growing culture of greenhushing. As one analyst put it, organisations are wary of disclosures being seen as “some kind of marketing document”, adding that “everyone’s a little bit scared to talk about this right now”.

An obvious danger here is that, if climate disclosures become overly cautious, defensive and compliance-focused, it risks undermining one of the regime’s original goals. That is to encourage organisations to openly assess and communicate climate risk, for the benefit of both organisations and their clients and investors.

It also risks running counter to the greater goal of genuine financial change. At present, many reporting organisations still provide far more detail about reporting processes than about how climate analysis is affecting lending, investment strategy or capital allocation decisions.

Closing that gap will likely require regulators and industry bodies to place greater emphasis on practical, decision-useful analysis rather than symbolic alignment with idealised climate scenarios.

It will also require reporting organisations to be more transparent about how climate risks and opportunities are influencing their decisions – even where the answers remain uncertain or incomplete.

Climate scenario analysis has the potential to influence how capital is allocated in a warming world. But that potential will only be realised if these assessments move beyond disclosure documents and into boardrooms, credit committees and investment mandates.

Otherwise, New Zealand risks ending up with a climate reporting system that generates more paperwork than action – and encourages silence rather than transparency.