Organisations face legal action from environmental groups and individuals due to non-compliance with climate change regulations. These lawsuits stem from perceived failures to meet legal requirements, potentially resulting in accountability for environmental impacts or financial losses. Three case studies highlight this trend:
- McVeigh v Retail Employees Superannuation Trust (REST) (2020):
Environmental scientist Mark McVeigh sued REST for neglecting climate risks in investments, leading to a settlement where the fund pledged transparency in managing climate risks.
- Bursill Enterprises Pty Ltd v Deloitte Touche Tohmatsu (2022):
A shareholder advocacy group sued Deloitte for alleged negligence in auditing a major bank’s financial statements, emphasising the growing legal scrutiny on financial institutions’ climate risk disclosures and auditing practices.
- Sharma v Minister for the Environment (2023):
An Australian citizen sued the government for insufficiently addressing climate change, emphasising the legal responsibility of governments in climate action and the role of lawsuits in enforcing environmental policies.
Looking ahead, several trends and challenges are expected to shape climate compliance and legal risk management, including:
- Climate-Related Disclosures: Organisations are facing increasing pressure to disclose climate-related risks and resulting impacts in their financial reports and other disclosures. Regulatory frameworks and reporting standards are evolving from the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) to the IFRS Foundation’s International Sustainability Board (ISSB), to encourage greater transparency and consistency in climate risk reporting.
- Liability Frameworks: As awareness of climate change risks grows, liability frameworks are likely to expand, holding organisations accountable for their contributions to climate change and resulting impacts. This could lead to an increase in litigation against companies that are perceived to be responsible for climate-related harms, such as carbon emitters or fossil fuel producers.
- Evolving Role of Courts: Courts are increasingly being called upon to adjudicate climate disputes and interpret laws related to climate change.
Navigating these emerging trends will require organisations to adopt proactive approaches to climate risk management and legal compliance. By integrating climate considerations into their governance frameworks, risk assessments and decision-making processes, organisations can mitigate legal risks and contribute to a more sustainable future.
Sean
Sean and the team at McGing Advisory & Actuarial provide a wide range of consulting services across superannuation, wealth management, life insurance, actuarial, risk management, investments, and governance.