Climate change litigation launched today against a major Australian bank could signal a global trend in investor lawsuits, an environmental law organisation argues.
Commonwealth Bank is the first financial services firm to be sued by shareholders over climate change disclosure with a husband and wife pair taking it to the Federal Court of Australia over its 2016 annual report.
The report failed to address climate risk as part of its risk management framework and did not include reference to funding for the controversial Carmichael coal mine in Queensland, papers filed to the court show.
The shareholders are seeking a declaration that Commonwealth Bank has contravened the Corporations Act and an injunction so that it does not continue to omit climate risks from future annual reports.
Commonwealth Bank says it takes its statutory reporting obligations very seriously and rejects that the annual report was not compliant with its statutory reporting obligations.
ClientEarth lawyer Daniel Wiseman says many other countries, including the UK, have similar disclosure requirements to Australia and that the case could signal a new trend.
“The Bank of England and other financial regulators have now made clear that financial institutions like banks and insurers should be considering climate risk.
“To limit exposure to this sort of litigation, business leaders need to get acquainted, and quickly, with their legal duties and with emerging industry standards, like the TCFD recommendations.”
Wiseman says this is particularly true for companies with clear exposure to the fossil fuel sector.
The Task Force on Climate-related Financial Disclosures, led by Bank of England governor Mark Carney and Michael Bloomberg, was launched in the lead up to the G20 with backing from financial institutions representing $25trn in assets.
Commonwealth Bank was absent from list of signatories supporting the TCFD recommendations on their release in June, although its rival ANZ was an early adopter, as was Australian miner BHP Billiton.
ANZ chief executive Shayne Elliott said at the time they wanted to send a signal that they would be seeking greater disclosure from their customers about climate-related risks and opportunities.
“Companies must improve reporting on their management of carbon risks and opportunities for their shareholders and banks to make more informed decisions.”
Commonwealth Bank says it is committed to limiting climate change to well below 2 degrees in line with the Paris Agreement and supporting the global transition to net zero emissions by 2050.