Abrahams v. Commonwealth Bank of Australia

Shareholders sued the Commonwealth Bank of Australia alleging that it violated the Corporations Act of 2001 by issuing its 2016 annual report without disclosing climate change-related business risks. Before the court could weigh in, the shareholders withdrew the suit after the bank issued a 2017 report acknowledging those risks.

Background
The Commonwealth Bank of Australia (CBA) has loaned over $6 billion to fossil fuel projects since 2015, which collectively account for over 2.8 billion tonnes of CO2 emissions. The bank's chief executive couldn't determine if it was aligned with the 2 degrees Celcius limit it had agreed upon. Guy and Kim Abrahams, an Australian couple who were shareholders of the CBA, sued the bank for failure to disclose risks of climate change. The law firm representing them, Environmental Justice Australia, argued that the bank's 2016 report withheld important information regarding climate change from its investors. As climate change becomes a more present issue with an increasing number of laws affecting fossil fuel projects, investors should know how risky the bank's investment decisions will be. The plaintiffs asked the Federal Court of Australia to a declaration that the bank violated the Corporations Act of 2001 and an order for the bank to report on climate change risks.

Relevant Laws and Principles

 * Corporations Act 2001
 * Paris Agreement

Status
The suit was dropped in 2017 after the CBA published its annual report that acknowledged climate change posed a significant risk to the company and included a promise to account for climate change in future analyses for investments. The plaintiffs stated that these changes were sufficient and were enough to drop the case, especially since the bank decided not to fund the controversial Adani Carmichael coalmine. Guy Abrahams said, “We are pleased the Commonwealth Bank has said it will not fund Adani’s Carmichael coalmine and is taking its first steps in a business-wide review of climate risks.”

Takeaways
When the case was first filed, Geoff Summerhayes of the Australian Prudential Regulatory Authority stated that "[s]ome climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now". The case, if it proceeded, would have set an important precedent for corporations on climate risk disclosure. This case would have been the first internationally to decide how companies must disclose climate risk to investors. Although it didn't proceed, the case still drew a lot of attention and showed that corporations, especially banks, need to pay attention to how they are involved with climate change and how they should include it in risk assessment. This case partly inspired O’Donnell v. Commonwealth, in which an Australian citizen sued the government over its investment in climate change.

Links

 * Environmental Justice Australia
 * Commonwealth Bank of Australia