Pressure mounts on banks as Aussie court gives shareholder access to CBA’s internal documents to check for greenwashing

Ruling follows heightened investor interest in banking activities and claims HSBC sought to weaken net zero commitments

A Commonwealth Bank of Australia (CBA) shareholder has been granted access to confidential documents to help it assess whether the country’s biggest bank has broken its own climate policy when lending to fossil fuel projects – in the latest sign that the greenwashing debate is turning its attention to the world’s lenders.   

Last week, Australia’s federal court broke new ground by allowing the Guy & Kim Abrahams Family Trust to inspect internal documents relating to seven of the banks’ oil and gas deals, including its role in oil & gas giant Santos’ acquisition of the Barossa Gas Field.  

Guy & Kim Abrahams Family Trust filed its request in August using Australia’s 2001 Corporations Act, which makes provisions for shareholders to apply to “inspect the books” of a company. The Trust is being represented by Equity Generation Lawyers’ David Barnden, who oversaw the 2018 climate lawsuit against Australian retail sector superannuation fund REST by a member. That case was settled last November with the fund committing to a raft of measures, including aligning its portfolio with net zero by 2050 and reporting against the Taskforce on Climate-related Financial Disclosures framework.   

According to Equity Generation Lawyers, in the latest case, documents were being sought “in the context of CBA’s 2019 Environmental and Social Framework and Environmental and Social Policy”.

The law firm pointed specifically to CBA’s following statement:  

“We ensure our business lending policies support the responsible transition to a net zero emissions economy by 2050, by […] only providing Banking and Financing activity to New oil, gas or metallurgical coal projects if supported by an assessment of the environmental, social and economic impacts of such activity, and if in line with the goals of the Paris Agreement.”  

Justice Cheeseman, who was only appointed to the Federal Court in April, ordered CBA to produce “all documents” needed to “carry out an assessment of the environmental, social and economic impacts of the Projects” and “carry out an assessment of whether the Projects are in line with the goals of the Paris Agreement”. The haul will be released in two tranches: one on December 9 and the other on February 10.  

Barnden told Reuters that the documentation would “enable our clients to inspect internal bank documents so they can come to a view on whether the bank was involved in greenwashing or have sufficient internal systems to ensure their policies are complied with”.   

Last month, CBA’s shareholders overwhelmingly rejected a resolution asking it to stop financing new fossil fuel projects, despite the International Energy Agency saying that the creation of new assets in the sector would undermine the goal of Net Zero by 2050. Speaking at the time, Chair Catherine Livingstone assured investors that “the board remains fully committed to CBA playing its part in limiting climate change, in line with the goals of the Paris Agreement, and supporting the transition to net zero emissions by 2050”.  

The successful legal action is the latest sign that banks are facing more scrutiny over whether their climate rhetoric aligns with their financing decisions. This week, the Bureau of Investigative Journalism said it had found evidence to suggest HSBC had lobbied to water down commitments under the Net Zero Banking Alliance – part of Mark Carney’s Glasgow Financial Alliance for Net Zero. 

Earlier this year, RI reported that Sweden’s biggest pension fund, Alecta, and the UK’s Brunel Pension Partnership were among investors planning to engage with banks more closely on their financing activities.  

“Engaging with banks to stop lending to fossil fuel companies for the purposes of exploration, and to phase out lending to fossil fuels companies for any purpose where they are not making efforts to align with the goals of the Paris Agreement is absolutely critical if we are to succeed in making a global transition to Net Zero,” Brunel’s Chief Responsible Investment Officer, Faith Ward, told RI at the time. 

Elsewhere, the European Leveraged Finance Association today opened a consultation on a new tool designed to “streamline the negative screening and exclusion process for CLO [collateralized loan obligation] managers”. 

The body’s ESG Exclusion Checklist for Business Activities would be completed by banks for the benefit of investors when arranging a new loan. It includes information such as the percentage of a company’s revenue that might be relevant to an investor’s ESG guidelines, to enable them to “quickly determine if a corporate borrower is a suitable investment candidate based on its ESG criteria”. 

The proposals cover weapons, tobacco, thermal coal, fossil fuels, gambling, hazardous chemicals and waste, intensive farming and palm oil. They include a specific section for utilities companies, which asks corporate borrowers to declare the percentage of electricity generated by thermal coal, liquid fuels (oil), natural gas and nuclear generation.   

“Rather than asking corporate borrowers to manage numerous different screening questionnaires from investors, the ESG Exclusion Checklist for Business Activities will allow borrowers to provide information in a standardised, consolidated manner, promoting a more efficient CLO market in Europe,” said Sabrina Fox, Chief Executive Officer, European Leveraged Finance Association.  

The consultation on the checklist will run until 15 December, with plans to release the final document in January 2022. 

Commonwealth Bank of Australia has been contacted for comment on the legal ruling.