Decision in Abrahams v Commonwealth Bank of Australia

On 11 November 2021, the Federal Court of Australia in Abrahams v Commonwealth Bank of Australia (CBA) NSD864/2021 ordered CBA to give the Guy & Kim Abrahams Family Trust authorisation to inspect some of the bank's internal documentation on seven oil and gas projects.

Relying on the Australian Corporation Act, Abrahams applied for access to those documents on the basis that CBA’s involvement in those projects could infringe its environmental and social policies, as published in 2019. In particular, Abrahams is seeking to determine whether CBA has complied with its policies by undertaking an assessment of the environmental, social and economic impacts of the projects and whether they are in line with the goals of the Paris Agreement.

These policies were implemented by CBA in response to previous proceedings brought by Abrahams against the bank in 2017. There, Abrahams alleged that CBA had failed to disclose adequately its climate change related risks in its 2016 annual report. The case settled, with CBA in its 2017 annual report issuing further disclosures of its climate change related risks. The bank also pledged to undertake climate change scenario analyses in relation to the financing of future carbon projects and ensure that its business lending policies support the responsible transition to a net zero emissions economy by 2050.

This latest application is the first ever example of a claimant seeking and successfully being granted disclosure of documents in order to determine whether a financial institution is adhering to its commitments on climate change. It is likely that, in the event that these projects fall foul of CBA’s policies, Abraham will bring a substantive claim against the bank. To date, however, Abraham has given little indication of how such a claim will be brought or on what grounds.

Strategic climate-related litigation against financial institutions is gathering pace globally as shareholder activism is on the rise (see the ExxonMobil and Chevron earlier this year). We anticipate that this decision may encourage shareholders of financial institutions in other jurisdictions to make applications similar to Abrahams, particularly at a time when increasing numbers of financial institutions are making public climate-related commitments and the UK Chancellor, Rishi Sunak, has pledged to make the UK the “world’s first net zero financial centre”.

There is no equivalent provision of the Australian Corporation Act to inspect company records under English law. However, shareholders in this jurisdiction may look to use existing tools, including pre-action disclosure and Norwich Pharmacal Orders, to gain access to confidential information in order to test whether financial institutions’ commitments bear scrutiny.