By Paula Nicolaou, Partner – Construction and Infrastructure, Wynn Williams

The term ‘environmental, social and governance’ (ESG) is becoming increasingly common in the construction and commercial property sectors. Recent legislation introduced to amend the Financial Markets Conduct Act 2013 now requires some of our biggest companies to make climate-related disclosures, which will undoubtedly have a flow‑on effect through the market as these entities require further information from customers to inform their own mandatory reporting.

With many other overseas jurisdictions also introducing new and stringent requirements in relation to ESG obligations, it is important that organisations are on top of the developments in this area. While the mandatory requirements in New Zealand may not yet apply to your organisation, we see these evolving in the future to apply to more and more entities.

We are increasingly seeing construction contracts and leases that contain specific ESG requirements that both contractors and principals must comply with – ranging from sustainable waste management and environmentally friendly specifications, to oversight of a contractor’s employees and supply chain. Tenants, especially public sector and larger corporates, are requiring specific sustainability outcomes in buildings, and further transparency on the activities of landlords and contractors. Careful consideration of these issues when contracting is key to delivering a great outcome for all parties.