Australian news, and some related international items

Legal case – a world first – against the Commonwealth Bank, over its failure to disclose climate risks

New CBA case a warning: Step up on climate change, or we’ll see you incourt John Hewson, Despite the scale and urgency of the climate crisis and popular support for action, governments and financiers are failing to act. This will have to change  John Hewson is a professor at ANU and a former Liberal leader, In a global first, Australian mum-and-dad shareholders Guy and Kim Abrahams have launched a case against the Commonwealth Bank, arguing that the bank has breached the law by not disclosing the risks climate change poses to its business.

Buying their shares over 20 years ago, Guy and Kim were making “an investment in their children’s futures”. A climate-changed world of financial risk, social upheaval and environmental degradation is clearly not the future they signed up for.

Climate change is an immediate threat to the entire global financial system. This was the ominous warning that came from the Australian Prudential Regulation Authority earlier this year. And they’re taking it seriously, declaring that they’ll be stress-testing the Australian financial system to force the financial sector to do more to transition to a clean economy. They’re right to do so.

Climate change is the “tragedy of the horizon,” governor of the Bank of England Mark Carney warned in a landmark speech in Berlin last year.

“We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix”, he said.

As Mr Carney predicted, despite the scale and urgency of the climate crisis and popular support for climate action, governments and financiers are failing to act.

However, international pressure and momentum is growing for corporations to declare and appropriately deal with the risks that climate change presents to the value of their assets and their future profitability.

The Asset Owners Disclosure Project (AODP), which I chaired, has led the world debate by surveying, rating, and ranking the world’s 500 largest investors on climate-risk management with the AODP global climate index over the last decade.

Funds are rated from AAA through to D grade, with an extra X category being added for those funds at the bottom that appear to be doing absolutely nothing to manage this critical risk.

This year, the fifth AODP global climate 500 index found that the scales have finally tipped. A 60% majority of asset owners, including pension funds, sovereign wealth funds, insurance companies, foundations and endowments, and half of asset managers, including Deutsche Asset Management and HSBC Global Asset Management, are now taking action to manage the risks and opportunities posed by climate change.

Institutional investors are growing increasingly impatient with companies dragging their heels. Earlier this year BlackRock Inc, the world’s largest asset manager with about US$5.1tn under management announced, “Investors can no longer ignore climate change”.

“Ultimately the board is responsible for protecting the long-term economic interests of shareholders and we may vote against the re-election of certain directors where we believe they have not fulfilled that duty” BlackRock said.

This echoes statements by APRA’s Geoff Summerhayes earlier this year that directors will be individually responsible for failing to appropriately manage climate change risks, following the release of an influential opinion by barrister Noel Hutely SC. Mr Hutely found that company directors who fail to properly consider and disclose foreseeable climate-related risks to their business could be held personally liable for breaching their statutory duty of due care and diligence under the Corporations Act, warning it’s “only a matter of time” before we see this sort of litigation against a director.

And at the G20 summit last month, Bank of England governor Mark Carney released the final report of the Michael Bloomberg-led task force on climate-related financial disclosure.

“Warming of the planet caused by greenhouse gas emissions poses serious risks to the global economy and will have an impact across many economic sectors,” Bloomberg said to Carney in a letter that introduced the report. “It is difficult for investors to know which companies are most at risk from climate change, which are best prepared, and which are taking action.”

National regulators in the US and UK are weighing in too, investigating large companies for failing to disclose the risk of climate change to their businesses.

In 2015, the New York attorney general launched an investigation into ExxonMobil. Attorney generals in numerous US states and the US Securities and Exchange Commission have since joined this investigation or launched their own.

In the UK, the Financial Reporting Council has opened an examination into whether two oil and gas exploration companies listed on the London Stock Exchange have made adequate risk disclosures in their annual reports.



August 12, 2017 - Posted by | AUSTRALIA - NATIONAL, climate change - global warming, legal

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