Antinuclear

Australian news, and some related international items

World first: shareholders sue Commonwealth Bank of Australia for misleading shareholders over climate risks

Climate change is a financial risk, according to a lawsuit against the CBA The Conversation, August 16, 2017 , Anita Foerster, Senior Research Fellow, University of Tasmania, Jacqueline Peel, Professor of Environmental and Climate Law, University of Melbourne The Commonwealth Bank of Australia has been in the headlines lately for all the wrong reasons. Beyond money-laundering allegations and the announcement that CEO Ian Narev will retire early, the CBA is now also being sued in the Australian Federal Court for misleading shareholders over the risks climate change poses to their business interests.

This case is the first in the world to pursue a bank over failing to report climate change risks. However, it’s building on a trend of similar actions against energy companies in the United States and United Kingdom.

  1. The CBA case was filed on August 8, 2017 by advocacy group Environmental Justice Australia on behalf of two longstanding Commonwealth Bank shareholders. The case argues that climate change creates material financial risks to the bank, its business and customers, and they failed in their duty to disclose those risks to investors.

    This represents an important shift. Conventionally, climate change has been treated by reporting companies merely as a matter of corporate social responsibility; now it’s affecting the financial bottom line.

    What do banks need to disclose?

    When banks invest in projects or lend money to businesses, they have an obligation to investigate and report to shareholders potential problems that may prevent financial success. (Opening a resort in a war zone, for example, is not an attractive proposition.)

    However, banks may now have to take into account the risks posed by climate change. Australia’s top four banks are heavily involved in fossil-fuel intensive projects, but as the world moves towards renewable energy those projects may begin to look dubious.

  2. As the G20’s Taskforce on Climate-Related Financial Disclosures recently reported, climate risks can be physical (for instance, when extreme weather events affect property or business operations) or transition risks (the effect of new laws and policies designed to mitigate climate change, or market changes as economies transition to renewable and low-emission technology).

    For example, restrictions on coal mining may result in these assets being “stranded,” meaning they become liabilities rather than assets on company balance sheets. Similarly, the rise of renewable energy may reduce the life span, and consequently the value, of conventional power generation assets.

    Companies who rely on the exploitation of fossil fuels face increasing transition risks. So too do the banks that lend money to, and invest in, these projects. It is these types of risks that are at issue in the case against CBA………https://theconversation.com/climate-change-is-a-financial-risk-according-to-a-lawsuit-against-the-cba-82505

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August 16, 2017 - Posted by | AUSTRALIA - NATIONAL, climate change - global warming, legal

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