Two landmark claims, which have reportedly been filed in the Federal Court of Australia over the past week, highlight the trend towards activist shareholder litigation in Australia.
On 26 August 2021, the Australasian Centre for Corporate Responsibility ("ACCR") initiated proceedings against Australian gas-producer Santos Limited, challenging statements and policies which the ACCR considered "greenwashing."
Then on 1 September 2021, it was reported that a shareholder, Guy Abrahams, had initiated proceedings against the Commonwealth Bank of Australia ("CBA") with the aim of obtaining documents detailing the CBA's decisions to finance oil and gas projects in order to consider whether such decisions are compliant with the CBA's environmental and social policies. Abrahams is also reportedly seeking disclosure of documents relating to the CBA's decision to adopt its 2021 climate plan.
Until recently, we have largely seen shareholders and activists make use of shareholder resolutions to challenge companies' positions in relation to climate change and other ESG matters. There was a marked increase in activity of this nature between 2017 and 2020 and this trend is continuing. However, these claims highlight that shareholders and activists are now also willing to pursue legal action against companies in Australia.
Significantly, the ACCR's claim against Santos represents the first court proceedings in the world to challenge the veracity of a net zero emissions target. The ACCR is also challenging assumptions made by Santos in relation to the viability of specific technologies to reduce emissions, including in particular carbon capture and storage ("CCS").
Specifically, the ACCR is seeking declaratory and injunctive relief, including an order that Santos publish a corrective statement to shareholders, on the basis that statements made by Santos in its 2020 Annual Report are misleading or deceptive, or likely to mislead or deceive, and therefore contravene the Australian Consumer Law and the Corporations Act 2001 (Cth). Notably, the ACCR does not seek an award of damages.
The statements the ACCR is challenging include that Santos has a "clear pathway to net zero emissions by 2040" and that Santos's "net zero by 2040 target is supported by a transition roadmap which is clear and credible". The ACCR asserts that these and a number of other similar statements are deceptive because Santos' net zero plan is based on untested assumptions about the viability of CCS, Santos has clear plans to increase its greenhouse gas ("GHG") emissions through increased production, and Santos has not yet decided whether to embark upon its Net Zero Roadmap, including making final investment decisions in relation to CCS.
The ACCR is also challenging statements that gas is a "clean fuel" and produces "clean energy" as incorrect, because the extraction of gas and electricity production from gas results in GHG emissions, and there are alternative sources of energy available.
Whilst the ACCR's and Abraham's claims are as yet untested, these proceedings highlight the importance of ensuring that public statements by companies in relation to climate change are demonstrably supported by rigorous internal policies and planning.
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