Guy and Kim Abrahams say case does not need to proceed after changes in bank’s 2017 annual report
Commonwealth Bank shareholders Guy and Kim Abrahams have dropped their world-first court proceedings against the bank for failing to disclose climate change risks in annual reports.
They said CBA’s 2017 annual report, which was published last month, included an acknowledgement for the first time from CBA directors that climate change posed a significant risk to the bank’s operations, with a promise to undertake climate change scenario analysis on its business in the upcoming year to assess the risk.
They said those two changes were a big turnaround for the bank and meant their case did not need to proceed.
“After years opposing resolutions to improve climate change reporting and refusing to rule out participating in Adani’s Carmichael coalmine, the Commonwealth Bank’s directors have finally acknowledged the seriousness of climate change in the 2017 annual report,” Guy Abrahams said in a statement on Thursday.
“Cultural change within the bank has been remarkably slow – the threat of climate change has been evident for decades.
“We are pleased the Commonwealth Bank has said it will not fund Adani’s Carmichael coalmine and is taking its first steps in a business-wide review of climate risks.”
The Abrahams’ claim, brought by lawyers at Environmental Justice Australia, said CBA’s 2016 directors’ report did not adequately inform investors of climate change risks. They had been seeking an injunction to stop the bank making the same omissions in future annual reports.
Their case would have been the first anywhere in the world to test in court how companies are required to disclose climate change-related risks in their annual reports and follows calls by shareholders, regulators and central banks around the world for greater clarity.
But less than a week after the Abrahams’ claim was filed in the federal court, CBA published its 2017 annual report, telling shareholders that climate change posed a significant risk to the bank’s operations.
It also published its first climate policy position statement, saying it would target an average emissions intensity decrease of its business lending portfolio consistent with its commitment to a net zero emissions economy by 2050.
It also said it would not lend money to Adani’s proposed Carmichael coalmine, leaving the controversial project without financing from any of Australia’s big four banks.
CBA says it considers climate change is “a significant long-term driver of both financial (credit, market, insurance) and non-financial (operational, compliance, reputation) risks” and it has pledged to develop a long-term strategy to manage its response to climate change.
“In line with the recommendations by the Taskforce on Climate-Related Financial Disclosures and the Australian Prudential Regulatory Authority (Apra), we are undertaking a scenario analysis to inform and guide the longer-term strategy,” CBA has said.
David Barnden, a lawyer for the shareholders, said CBA’s climate change policy had still been criticised for failing to phase out investments in industries like thermal coal that exacerbate climate change.
“The Commonwealth Bank has been a long-time laggard on telling its shareholders about climate risks, so this is an important change,” he said on Thursday. “Under the Corporations Act, directors of Australian companies must give shareholders information about financial risks. CBA now acknowledges climate change is a material financial risk to the bank.”
In February, Apra warned that climate change posed a material risk to Australia’s entire financial system and urged companies to start adapting.
Geoff Summerhayes from Apra said companies must start incorporating sophisticated “scenario-based analysis” of climate risks into their business outlooks. He said Apra intended to start running stress tests of the financial system to see if it would survive various adverse climate shocks.
Barnden said lawyers acting for Guy and Kim Abrahams had been working pro bono.
The Commonwealth Bank has welcomed the fact that proceedings have been dropped, saying allegations the bank was not compliant with its statutory reporting obligations were incorrect.
“Claims that such action has changed how CBA reports on climate change are untrue, with our 2016 and 2017 annual reports being compliant with statutory reporting obligations,” a spokesman said.
“The section in the 2017 annual report regarding climate change as a business risk was the result of careful and extensive consideration over many months by the board and senior executives and was already well advanced when the claim was served.”
By Gareth Hutchens
Published by Guardian Australia on 21 September 2017