Shareholder group takes Commonwealth Bank to court in bid to discover climate risk
Most Australians want to see action on climate change. But the vast majority is unaware that the banks, superannuation and insurance funds that manage our money almost exclusively invest in coal, oil and gas and highly polluting companies.
How the trillions of dollars Australians invest in banks and superannuation funds is managed is vitally important to the transition to a clean energy economy. By making sure our savings are kept out of companies driving dangerous climate change, we can play a huge role in decarbonising our economy.
Shareholders, investors and customers are using their power to hold these institutions to account for damaging our climate and driving them away from investing in polluting fossil fuels towards investments that don’t harm our environment.
Guy and Kim Abrahams are husband and wife and long-term “mum and dad” shareholders in the Commonwealth Bank Australia.
In August 2017, EJA filed Federal Court proceedings against the Commonwealth Bank of Australia (CBA) on behalf of Guy and Kim Abrahams for failing to adequately disclose climate change risk in the bank’s 2016 annual report.
This was the first case in the world brought by shareholders to test how banks should disclose information about climate change risks in their annual reports.
The claim alleged that climate change risks posed material or major risks to the bank and by not disclosing the risks climate change poses to its business, CBA failed to give a true and fair view of its financial position and performance, in contravention of s 297 of the Corporations Act.
The claim also alleged that the directors’ report in the 2016 annual report inadequately disclosed climate change risks that investors reasonably required to make an informed assessment of the bank’s operations, financial position, business strategies and prospects for future financial years, as required by s 299A of the Corporations Act.
The case also raised concerns about the risks, including reputational risks, of the Commonwealth Bank providing financial assistance or funding to Adani’s proposed Carmichael coal mine project. The Abrahams alleged that due to the very public controversy surrounding Adani’s Carmichael project, CBA knew or should have known that the provision of any form of financial assistance for funding for mine would pose material or major risks to the bank. The shareholders say those risks should have been disclosed in the 2016 annual report.
The Abrahams sought a declaration that CBA failed to adequately disclose climate change risks in its 2016 annual report, contravening sections 297 and 299A of the Corporations Act, and an injunction to stop the bank making the same omissions in future annual reports.
The Commonwealth Bank published their 2017 annual report less than a week after the Abrahams’ claim was filed. In it, CBA’s directors advised shareholders that climate change was a material risk to the bank being able to execute its strategies. Accordingly, the grounds for the case fell away before it could be heard in court.
In the 2017 annual report, CBA promised to undertake climate change scenario analysis on its business in the upcoming year to assess the risk.
CBA’s change of heart came after eight months of legal correspondence between Environmental Justice Australia and the bank, culminating in EJA filing proceedings in the Federal Court on 8 August, 2017.