The Commonwealth Bank of Australia (CBA), the country’s largest listed company, is facing a legal challenge for failing to adequately disclose climate change risk and risks associated with fossil fuels in its 2016 annual report
Lawyers from the pressure group Environmental Justice Australia have filed proceedings in the Federal Court on behalf of shareholders Guy and Kim Abrahams. The case is the first anywhere in the world by shareholders to test how banks should disclose information about climate change risks in their annual reports.
The claim alleges that by not disclosing the risks climate change poses 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.
The claim seeks an injunction to stop the bank making the same omissions in future annual reports.
It highlights what it says is the bank’s failure to point out the risks associated with the Adani Carmichael coal mine project in Queensland, and whether it was being or would be funded by CBA. The lobby group says this was a matter of substantial controversy and concern in Australia; and CBA knew or ought to have known of that controversy and concern and that the provision by CBA of any form of financial assistance or funding for Carmichael posed, and continues to pose, material or major risks (including reputational risks) to its business.
Guy Abrahams, the shareholder named in the action, is an art consultant/valuer and CEO of not-for-profit Climarte, an arts sector alliance concerned with climate change. Kim Abrahams is a medical practitioner.
Guy Abrahams said: ‘We bought Commonwealth Bank shares more than 20 years ago as an investment in our children’s future.
‘We are deeply concerned about the serious risks that climate change poses to the environment and society. The bank should tell investors about the risks climate change will have on its business.’
Kim Abrahams said: ‘The Commonwealth Bank is Australia’s biggest company and should be a leader in responding to climate change and accurately reporting the risks to shareholders.’
David Barnden, lawyer for Environmental Justice Australia, said the case is the first of its kind to test the extent of climate change risk disclosure 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.
CBA has acknowledged the legal proceedings and said in a statement: ‘Commonwealth Bank takes its statutory reporting obligations very seriously and rejects that the 2016 annual report is not compliant with those statutory reporting obligations.
‘Commonwealth Bank understands that climate change is a topic of public and shareholder interest and we are committed to playing our part in limiting climate change to well below 2 degrees in line with the Paris Agreement and supporting the responsible global transition to net zero emissions by 2050.’
Details of the legal challenge are here.