New Zealand passed a law Thursday forcing banks to reveal the impact of their investments on climate change, describing it as a world-first move to make the financial sector's environmental record more transparent.

Climate Change Minister James Shaw said the law meant banks, insurance companies and investment firms would make mandatory disclosures about their portfolios' global warming record from next year.

New Zealand's farm-reliant economy means agricultural emissions account for around half of its greenhouse gases
New Zealand's farm-reliant economy means agricultural emissions account for around half of its greenhouse gases AFP / NEIL SANDS

Shaw, who will head to Glasgow later this month for crunch climate talks hosted by the United Nations, said the disclosures would outline the real-world consequences of investment choices.

"It will encourage entities to become more sustainable by factoring the short, medium, and long-term effects of climate change into their business decisions," he said in a statement.

"New Zealand is a world leader in this area and the first country in the world to introduce mandatory climate-related reporting for the financial sector," he added.