New Zealand passed a law Thursday that obliges banks to disclose the impact their investments have on climate change. Wellington described this move as the world's first to make the financial sector's environmental record more transparent.

Climate Change Minister James Shaw said the law would compel banks, insurance companies, and investment firms to disclose their portfolios' global warming record as of next year.

The minister, who will head to Glasgow for the COP26 climate summit in late October, where 20,000 heads of state, diplomats, and activists will meet to discuss climate change and cutting emissions from fossil fuel, said the disclosures would outline the real-world consequences of investment choices. This would allow investors to make more green choices and hold financial institutions accountable.

The law will "encourage entities to become more sustainable by factoring the short, medium, and long-term effects of climate change into their business decisions," the climate change minister 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.