Australian Bank Sued Over Climate Risk Management

A shareholder of Melbourne-based ANZ Bank has filed a claim in the Australian Federal Court arguing that the bank has failed to properly manage the material risks of climate change and biodiversity loss, and is seeking an order that the bank provide more information about its risk management framework.

Lawyers for shareholder Catherine Rossiter, Equity Generation Lawyers, issued a statement saying Rossiter’s concerns originate from disclosures in the bank’s 2022 annual report that acknowledged climate change and biodiversity loss were “emerging risks”, without making clear whether those risks were adequately dealt within its risk management framework.

Equity Generation Lawyers said Ms. Rossiter seeks copies of ANZ’s internal risk management framework because she is concerned the bank may not be properly managing the twin risks of climate change and biodiversity loss.

The statement on Equity Generation’s website says; “since 2016, ANZ has reportedly loaned A$18.6bn to fossil fuels. It recently increased lending to fossil fuel projects whilst its peers significantly reduced theirs.” 

“ANZ loaned A$2.6bn in 2022 to fossil fuel projects, up from A$2bn in 2021. In contrast, CBA significantly reduced its lending to A$267m in 2022 from A$1.3bn in 2021. “

“Furthermore, ANZ and its shareholders are significantly exposed to risks stemming from biodiversity loss. ANZ reported its aggregate exposure to the agriculture, forestry, fishing and mining sectors – being those generally highly dependent on biodiversity – as A$52.1bn in 2022.”

“Australia’s economy is heavily reliant on nature. Approximately half of Australia’s GDP (49.3% or A$892.8 billion) has a moderate to very high direct dependence on nature.”

The Basis of The Claim

Equity Generation’s statement adds; “Our client is concerned, based on disclosures in its 2022 Annual Report, that ANZ is not satisfying governance standards for the risks of climate change and biodiversity loss.”

“APRA’s Prudential Standard CPS-220 Risk Management requires, amongst other things, ANZ to maintain a risk management strategy that addresses material risks. ANZ’s 2022 Annual Report suggests that neither climate change nor biodiversity loss is addressed as material risks in ANZ’s risk management strategy; a board-approved document that gives effect to the organisation’s approach to managing risk.”

“The practical effect of such an omission is that ANZ may be failing to measure, evaluate, monitor, control, and mitigate those risks. This, in turn, could affect shareholder value through exposure to the physical and transition risks associated with climate change and biodiversity loss.”

“Our client seeks information from ANZ, by way of preliminary discovery, about its risk management systems to enable her to determine whether the bank’s governance systems adequately deal with climate change and biodiversity risks.”

The Sydney and Melbourne-based law firm said it now seeks access to the information to determine whether their client has a right to obtain relief from the Court in relation to the question of whether ANZ has breached its obligations under APRA Prudential Standards or misleading conduct laws.