Chair: Greenwashing Session | Australian Bar Association, Cornerstone 2023

Panel: The Hon. Justice Pepper (Judge, Land and Environment Court of NSW), Sebastian Hartford Davis (Barrister, NSW Bar) and Mark Smyth (Partner, Herbert Smith Freehills).  

21-23 September 2023

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Insuring a Better Future: The Rise of ESG Claims.

Barry Nilsson

14 September 2023

Climate litigation risks continue to evolve. The absence of historical data presents an unknown that inhibits a proper assessment of the risks. This not only presents a financial risk to insurers but also to insureds whose businesses are impacted by climate change or who attract insured climate/greenwashing risks in seeking to comply with their climate obligations.

Cases will arise and evolve in unexpected ways as companies operate in a transitioning economy and seek to align their business practices with a net zero future. Greenwashing is an example of this.

The continued improvement in the attribution science, the application of commercial and financial statutory causes of action to climate issues and, the desire to ensure polluters pay, are some of the factors that suggest that case numbers will continue to increase, perhaps exponentially, in the short to medium term.  Australia, while behind the USA in the raw number of filed cases, exceeds the USA on a case per million citizens analysis. These figures are not beyond criticism, but at a high level, reveal the strong appetite in the Australian market to pursue climate litigation.

Currently, Australia’s case numbers are predominated by administrative law cases, such as judicial review and merits review of planning and environmental approvals. However, there continues to be a steady increase in “commercial” and tortious climate litigation. It is expected that these areas will continue to grow to predominate the Australian climate litigation landscape. This could result in increased exposure for insurers.

The possible proliferation of cases as a result of historical emissions and the myriad of consequences that arise as businesses transition, could present as the long tail of risk for insurers and underwriters. In 2030 and 2050, the commercial and financial risks of transitioning may crystallise, creating the opportunity for litigation.

Regulatory activity will continue. The civil penalty cases that ASIC has commenced against Mercer, Vanguard, and Active Super for misleading statements in respect of their negative screens might indicate that after a period of signalling to the market its position through the use of infringement notices, ASIC has entered a new phase in which Court proceedings will become more common. The conduct sought to be addressed by these future regulatory proceedings will not be limited to negative screens. It should be expected that ASIC will prosecute a wide range of greenwashing conduct including those flagged in its guidance document, INFO 271.

Regulatory action could provide the basis for the pursuit of related civil and class actions.

Greenwashing Webinar

HWL Ebsworth

1 September 2023

A universally accepted definition of the term “greenwashing” remains elusive. ASIC has proposed a “guidance” definition in INFO 271. More recently, the ACCC has proposed a “guidance” definition with the release of its draft guidance on “greenwashing”. The ACCC’s proposed definition differs from that published by ASIC in a number of ways.
The statutory misleading or deceptive conduct provisions are not the only way in which “greenwashing” could be pursued. A misleading environmental/climate representation could be used to prove elements of other governance type causes of action and the factual context necessary to prove those other causes of action. Businesses need to be alive to these risks.

The Federal Greenwashing Inquiry (March 2023) will make recommendations on the legislative options to protect consumers from greenwashing in Australia. It is possible there will be recommended changes to misleading or deceptive conduct regimes in the various Acts to include purpose built provisions directed at providing additional clarity in respect of environmental/climate statements made in respect of businesses, products and services. The EU has proposed a specific greenwashing law.
The 3 recent greenwashing proceedings commenced by ASIC focus primarily on non-compliance with published negative screens. ASIC had earlier notified the market of this being an area of concern by issuing infringement notices in respect of this conduct.

ASIC has also issued infringement notices in respect of misleading statements made to the ASX. These statements included use of terms such as  “carbon neutral” and “net zero”. However, the infringement notices were not directed at the use of the terms but the fact that there was not sufficient evidence to support these statements. Both regulators have not sought to define these and other troublesome terms, the use of which could expose parties to greenwashing allegations. Instead the regulators have focused on proper disclosure around the use of these terms.

Net zero pledges and emissions targets could amount to representations as to future matters. Absent a reasonable basis, these representations could amount to misleading conduct. A US Court recently refused to find that a pledge was misleading because it considered that until the pledge date arrived, the pledge was merely aspirational and not capable of being misleading.

Pushing Boundaries. Trends in International Climate Change disputes.

King & Wood Mallesons and The National Environmental Law Association

28 July 2022

Sustainability and Greenwashing

ACCC (AANZFTA Consumer Affairs Program) to present on greenwashing to the regulatory authorities in Australia, New Zealand and various ASEAN States. 

3 November 2022

Understanding directors’ duties and regulatory approaches to greenwashing

Lander & Rogers. 

21 March 2023

Spotlight on Financial Services-ESG and greenwashing risk

Hall & Wilcox.

9 May 2023