TWO shareholders have lodged a world-first lawsuit against the Commonwealth Bank because it failed to mention climate change risk in its annual report last year.
Lawyers from Environmental Justice Australia today filed proceedings in the Federal Court on behalf of shareholders Guy and Kim Abrahams, with the case expected to test how companies should disclose information about climate change risks in their annual report.
The claim alleges that by not disclosing the risks posed to its business, the bank failed to give a true and fair view of its financial position and performance, as required by the Corporations Act.
The shareholders also claim the 2016 directors’ report did not adequately inform investors of climate change risks.
They want an injunction to stop the bank making the same mistake in future annual reports.
The action also raised concerns about the risks, including reputational risks, to the Commonwealth Bank if it funds Adani’s controversial Carmichael coal mine project in Queensland.
Green groups have been targeting the bank over its potential financing of the coal project and have called on it to rule this out.
Ms Abrahams said the bank was Australia’s biggest company and should be a leader in responding to climate change and accurately reporting risks to shareholders.
“We bought Commonwealth Bank shares more than 20 years ago as an investment in our children’s future,” Mr Abrahams said.
“We are deeply concerned about the serious risks climate change poses to the environment and society. The bank should tell investors about the risks climate change will have on its business.”
Environmental Justice Australia lawyer David Barnden said the case was the first of its kind to test the obligation to disclose climate change risk in annual reports.
“We believe the matter is of significant public interest. It should set an important precedent that will guide other companies on disclosing climate change risks,” he said.
News.com.au has contacted the Commonwealth Bank for a response.
The Australian Prudential Regulation Authority (APRA)’s Geoff Summerhayes and Noel Hutley SC have already acknowledged that climate risks are financial risks and company directors should take them seriously.
Companies are increasingly being pushed to recognise climate change as a financial risk.
Former Liberal leader John Hewson is the chair of the Asset Owners Disclosure Project, which evaluates how most of the world’s biggest investors are managing the risk of climate change and has called for more transparency around the issue.
There are also more people trying to use legal action as a way of forcing action on climate change, including a group of young people in America who are taking the US Government to court over its failure to act on climate change.
By Charis Chang
This story was published by News.com.au on 8 August 2017