The climate plans of Australian companies would be immune to private litigation for three years under an Albanese government proposal before parliament.
The grace period is included in legislation before the Senate that would expand the information companies must provide about the risk the climate crisis poses to their business and what they will do about it.
The bill has been praised as a necessary step in improving corporate climate disclosure and accountability, but lawyers and shareholder activists are concerned that polluting companies accused of greenwashing could avoid public scrutiny – and investors could be denied information about companies – for an extended period.
The draft legislation says some types of statements by companies, directors and auditors would be protected from legal challenge during a phase-in period unless the business was accused of criminal behaviour or an action brought by the Australian Securities and Investments Commission (Asic).
Law firm Equity Generation said the laws would have almost certainly prevented cases that successfully challenged the Commonwealth Bank and NAB over funding fossil fuel projects. The bill could also have stopped a “world-first” challenge to Rest Super over its duty to consider the climate crisis when making investments.
David Barnden, Equity Generation’s principal lawyer, said the proposed immunity – which applies to company statements about climate scenario analysis, transition plans and “scope 3” emissions released by customers when they use the company’s products – would “remove a critical avenue for investors to ensure market integrity”.
The Australasian Centre for Corporate Responsibility, a shareholder advocacy organisation, said “an extended enforcement holiday” from existing accountability would reduce motivation for companies to take mandatory climate disclosure requirements seriously.
Its executive director, Brynn O’Brien, said she was particularly concerned the immunity period would affect the information disclosed by big heavy emitters that already release climate transition plans in line with the recommendations from the global taskforce on climate-related financial disclosures.
“[The centre’s] case that challenges statements made by oil and gas company Santos, for example, could not be brought by a shareholder for three years under the draft legislation,” O’Brien said. “It is an inappropriate burden to place the sole responsibility of enforcing these provisions on under-resourced regulators for such a prolonged period.”
Mayleah House, of boutique fund manager Ethical Partners, said the immunity period would undermine shareholder rights and corporate responsibility. She said directors had adequate protection under existing misleading and deceptive conduct laws.
“Companies that have had the foresight to see what’s coming down the track should be – and are – prepared for disclosures,” House said.
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The Greens have proposed an amendment to reduce the three-year immunity period to one year.
The party’s spokesperson for economic justice and Treasury, Nick McKim, said Labor’s mandatory disclosure legislation was “an important part of pushing money out of coal and gas and into the clean investments we need for a safe future”, but “a three-year holiday given to the biggest corporations is too generous”.
“Asic hardly has a reputation as a tough corporate cop on the beat, so we hope the government supports the Greens’ amendments in the Senate to rein in the disclosure immunity back to one year and narrow its scope,” he said.
The mandatory disclosure proposal is based on the work of the International Sustainability Standards Board. A spokesperson for the treasurer, Jim Chalmers, said the government was “taking action on climate reporting to unlock more investment in cheaper and cleaner energy and help companies and investors manage climate risks”.
“We’re doing this in a responsible way that ensures we incentivise more investment as quickly as possible without the risk of penalising businesses that are trying to do the right thing,” he said.
The Coalition has said the mandatory reporting regime would increase costs on business, particularly small and medium-sized operators, describing it as “more red and green tape”.
If passed, the new regime would start on 1 January.
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