A Commonwealth Bank shareholder is taking the company to court to gain access to documents detailing its decision to finance oil and gas projects despite their potential to breach the Paris Agreement goals, in an action that could signal a new wave of climate change litigation.
The Federal Court case is a first for climate lawfare in Australia, with the head of the University of Melbourne’s Climate Futures Initiative, Jacqueline Peel, warning it could provide “a new avenue” for shareholders seeking to hold companies to account for their environmental commitments.
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An oil field in the Permian Basin in Texas – CBA is facing legal
action related to its decision to finance pipelines to carry natural
gas from the site. |
The shareholder, Guy Abrahams, is seeking to inspect “all documents created by [CBA] in relation to CBA’s gas projects and CBA’s fossil fuel projects” for the purpose of complying with its environmental and social framework.
He specifically points to the Permian Highway Pipeline project to carry natural gas in the US, Gaslog and FLEX LNG’s new LNG vessels, Energy Infrastructure Investments’ Tipton West coal seam gas project, Siccar Point’s Cambo oil field development, Euronav NV’s crude carriers, and Santos’ acquisition of the Barossa Gas Field.
He wants any documents related to the bank’s assessment of the environmental, social and economic consequences of these projects and whether they are in line with the Paris Agreement goals.
The role of CBA’s directors is also under his scrutiny, as Mr Abrahams is also demanding access to “without limitation, any documents provided to [CBA’s] board” about the adoption of its 2021 climate plan.
Equity Generation Lawyers, the legal firm behind strategic climate actions such as the Rest and Sharma cases, is bringing the case on behalf of Mr Abrahams, who also settled a case against CBA in 2017 alleging it failed to disclose climate risks in its 2016 annual report.
New form of climate litigation
While shareholders’ power to inspect books has been subject to prior cases, it has not yet been used in one related to environmental concerns.
But Professor Peel said that if the application was successful, it could create a new form of climate litigation in Australian courts.
“If you get the information and it shows that there’s a difference between what they [the company] say they’re doing and what they’re actually doing, that potentially would be grounds for a case for breaching directors’ duties or misleading and deceptive conduct, or both,” Professor Peel said.
“You would imagine that lots of banks that currently have these kinds of commitments in place and shareholders are increasingly interested in whether the companies they’re invested in are carrying out their climate commitments.
“This could be a new avenue for shareholders to assert their rights and see whether the companies are meeting those.”
Professor Peel said targeting the institutions financing fossil fuel projects was part of a broader move in climate litigation to target the businesses and individuals sitting behind the companies directly involved.
“Looking at the broader context [in which] this case is happening, there’s an accountability spread to a lot of the [climate] litigation we’re seeing,” she said.
“And if financing is key to these projects going ahead, then it’s bringing that accountability back to the financiers.”
While financing some oil and gas projects was often seen as compatible with meeting the Paris targets five years ago, with only coal blacklisted, new climate modelling suggests that this is no longer the case.
But to be successful, the Abrahams case will need to convince the court that its application stems from a genuine exercise of shareholder rights and not for “an improper purpose”.
The courts have rejected similar applications before after deciding they were actually attempts to get documents to help develop class action claims, for example.
“That means [Mr Abrahams or other shareholders] need to show they are worried about the value of their shares going down because of something the company may or may not be doing,” Professor Peel said.
“It can’t be for an improper purpose such as getting information for further litigation.”
A CBA spokesman declined to comment on the case while it was before the court but said the bank was committed to helping meet the Paris targets.
“On 11 August 2021 we released our Annual Report and our updated Environmental and Social Framework, which include a considered plan for managing both the risks and opportunities of climate change,” he said.
“We are committed to playing our part in limiting climate change in line with the goals of the Paris Agreement and supporting the transition to net zero emissions by 2050.”
Links
- (AU SMH) Santos Hit With Climate Lawsuit Over ‘Net Zero’ Claims
- (AU SMH) ‘Really Big Win’: NSW Environmental Watchdog Ordered To Address Climate Change
- (Grist) New UN Report Could Be A Game-Changer For Climate Lawsuits
- (AU EDO) Landmark Bushfire Survivors’ Climate Case Is Heard
- (AU EDO) $21 Million In Beetaloo Gas Grants To Face Federal Court Challenge
- (AU ABC) Legal Challenge Launched Against Federal Government's $21 Million Beetaloo Basin Grant
- (AU ABC) Human Rights Issue Or 'Green Lawfare'? Citizens Take To The Courts To Fight Climate Change
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