Amid accusations of repeatedly breaching money laundering laws that may have led to the funding of terrorism, the Commonwealth Bank has found itself in yet another saga, now being dragged to court by angry shareholders for failing to adequately disclose climate change risk.
Proceedings have been filed in the Federal Court by Environmental Justice Australia on behalf of shareholders Guy and Kim Abrahams, who allege 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 in its 2016 annual report, as required by the Corporations Act.
The shareholders also allege that the 2016 directors’ report did not inform investors of climate change risks faced by the bank.
Alleged risks include those related to financial assistance given to the Adani Carmichael mine.
“The Adani Carmichael coal mine project in Queensland, and whether it was being or would be funded by CBA, 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,” the notice of filing states.
According to Environmental Justice Australia, it is the first case in he world by shareholders to test how banks should disclose information about climate change risk in annual reports.
“We believe the matter is of significant public interest,” lawyer David Brandon said.
“It should set an important precedent that will guide other companies on disclosing climate change risks.”
Mr Abrahams said the couple had bought Commonwealth Bank shares 20 years ago as an investment in their children’s future.
“We are deeply concerned about the serious risks that climate change poses to the environment and society,” he said.
“The bank should tell investors about the risks climate change will have on its business.”
Ms Abrahams said as Australia’s biggest company, the bank should be a leader in responding to climate change, and should accurately report risks to shareholders.
In a statement, the Commonwealth Bank said it understood climate change was a topic of public and shareholder interest, and was committed to play its part in limiting climate change to well below 2°C in line with the Paris Agreement.
However, it said it rejected the assertion that it had not met the Corporations Act requirements.
“Commonwealth Bank takes its statutory reporting obligations very seriously and rejects that the 2016 Annual Report is not compliant with those statutory reporting obligations,” it said.
The case follows statements by Australian Prudential Regulation Authority executive director Geoff Summerhayes, which pointed to a legal opinion that found “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”.
The Commonwealth Bank on Wednesday posted a yearly profit of $9.93 billion.