This case is the first in the world to pursue a bank over failing to report climate change risks. However, it’s building on a trend of similar actions against energy companies in the United States and United Kingdom.
The CBA case was filed on August 8, 2017 by advocacy group Environmental Justice Australia on behalf of two longstanding Commonwealth Bank shareholders. The case argues that climate change creates material financial risks to the bank, its business and customers, and they failed in their duty to disclose those risks to investors.
This represents an important shift. Conventionally, climate change has been treated by reporting companies merely as a matter of corporate social responsibility; now it’s affecting the financial bottom line.
What do banks need to disclose?
When banks invest in projects or lend money to businesses, they have an obligation to investigate and report to shareholders potential problems that may prevent financial success. (Opening a resort in a war zone, for example, is not an attractive proposition.)
However, banks may now have to take into account the risks posed by climate change. Australia’s top four banks are heavily involved in fossil-fuel intensive projects, but as the world moves towards renewable energy those projects may begin to look dubious.
As the G20’s Taskforce on Climate-Related Financial Disclosures recently reported, climate risks can be physical (for instance, when extreme weather events affect property or business operations) or transition risks (the effect of new laws and policies designed to mitigate climate change, or market changes as economies transition to renewable and low-emission technology).
For example, restrictions on coal mining may result in these assets being “stranded,” meaning they become liabilities rather than assets on company balance sheets. Similarly, the rise of renewable energy may reduce the life span, and consequently the value, of conventional power generation assets.
Companies who rely on the exploitation of fossil fuels face increasing transition risks. So too do the banks that lend money to, and invest in, these projects. It is these types of risks that are at issue in the case against CBA.
What did the CBA know about climate risk?
The claim filed by the CBA shareholders alleges the bank has contravened two central provisions of the Corporations Act 2001:
companies must include a financial report within the annual report which gives a “true and fair” view of its financial position and performance, and
companies must include a director’s report that allows shareholders to make an “informed assessment” of the company’s operations, financial position, business strategies and prospects.
The shareholders argue that the CBA knew – or ought to have known – that climate-related risks could seriously disrupt the bank’s performance. Therefore, investors should have been told the CBA’s strategies for managing those risks so they could make an informed decision about their investment.
While the CBA case represents the first time worldwide that a financial institution has been sued for misleading disclosure of climate risk, the litigation builds on a broader global trend. There have been a number of recent legal actions in the United States, seeking to enforce corporate risk disclosure obligations in relation to climate change:
Energy giant Exxon Mobile is currently under investigation by the Attorneys General of New York and California over the company’s disclosure practices. At the same time, an ongoing shareholder class action alleges that Exxon Mobile failed to disclose internal reports about the risks climate change posed to their oil and gas reserves, and valued those assets artificially high.
Similar pathways are being pursued in the UK, where regulatory complaints have been made about the failure of major oil and gas companies SOCO International and Cairn Energy to disclose climate-related risks, as required by law.
In this context, the CBA case represents a widening of litigation options to include banks, as well as energy companies. It is also the first attempt in Australia to use the courts to clarify how public listed companies should disclose climate risks in their annual reports.
Potential for more litigation
This global trend suggests more companies are likely to face these kinds of lawsuits in the future. Eminent barrister Noel Hutley noted in October 2016 that many prominent Australian companies, including banks that lend to major fossil fuel businesses, are not adequately disclosing climate change risks.
Hutley predicted that it’s likely only a matter of time before we see a company director sued for failing to perceive or react to a forseeable climate-related risk. The CBA case is the first step towards such litigation.
This article is part of an ongoing series from the Post-Truth Initiative, a Strategic Research Excellence Initiative at the University of Sydney. The series examines today’s post-truth problem in public discourse: the thriving economy of lies, bullshit and propaganda that threatens rational discourse and policy.
The project brings together scholars of media and communications, government and international relations, physics, philosophy, linguistics, and medicine, and is affiliated with the Sydney Social Sciences and Humanities Advanced Research Centre (SSSHARC), the Sydney Environment Institute and the Sydney Democracy Network.
Michael Mann is well known for his classic “hockey stick” work on global warming, for the attacks he has long endured from climate denialists, and for the good fight of communicating the environmental and political realities of climate change.
Mann’s work, including his recent book The Madhouse Effect, has helped me, as a dual US-Australian citizen, think about the similarities and differences between the US and Australia as we respond to what has been called the climate change denial machine.
In both countries, the denialists and distortionists have undermined public knowledge, public policy, new economic development opportunities, and the very value of the environment. Climate policy is being built upon alternative facts, fake news, outright lies, PR spin and industry-written talking points.
How we can expose and counter this denialist machine? To partly lay out the task, I will discuss three points of contrast between the US and Australia.
There is a key difference between the two countries’ political cultures. As much as the denialists have determined Australian energy and climate policy, they have not been as successful, yet, at undermining deep-seeded respect in Australian culture for the common good, for science, for expertise and knowledge.
I left the US at the start of 2011. Living in Arizona, I had experienced the full weight of the racism, the white nationalism, the anti-intellectual, anti-education, anti-fact atmosphere that has since spread all the way to the White House.
I used to tell people I left because Arizona had simply become anti-enlightenment. Folks really didn’t get it, until now, when it is the attitude that rules the country.
Shortly after I arrived in Australia, the then-prime minister, Tony Abbott, led an attack on the work of economist Ross Garnaut. Abbott slammed Garnaut’s 2011 report as anti-democratic. The report had simply pointed out the cost of climate inaction and the viability of putting a price on carbon.
Later, Abbott doubled down and dismissed the quality of Australian economists as a whole. Other denialists went further – Garnaut was called a fascist and was subject to the kind of attacks Mann is well familiar with.
Surprisingly to me, a good part of the public seemed appalled by Abbott’s trashing of an academic. This was seen an attack not just on a carbon price, or a policy recommendation, but on science and knowledge as a whole.
And there was the chief scientist on TV, defending the academy – and that’s when I learned Australia actually had a chief scientist, to whom the media paid attention. This is not something we had in Arizona.
Abbott wound up backing down from the worst of the criticism. The whole series of events illustrated to me, a new Australian, that there is a strong cultural norm here that supports science, that respects expertise and that understands that real knowledge should be used to inform good policy in the public interest.
It wasn’t a one-time event. Last year, when the government fired climate scientists at CSIRO, there was another huge public backlash. The government had to step back a bit, both on the actual science to be done and the radical agenda change away from science for the public good.
And again, when the government wanted to support the dubious work of Bjorn Lomborg, that caused an outcry from both the university sector and the public. Even though the government wound up paying more than A$600,000 on what The Australian called his “vanity book project”, they couldn’t import him and plant him at any Australian university.
As Mann says, the main issue in implementing good, sound climate policy is no longer simply the science. The main issue is the cultural understanding of, and respect for the role of science in informing political decisions.
My second point of comparison is not quite as positive.
The problem in Australia is less a culture turning against the Enlightenment, and more the direct political power and influence of the carbon industry. This is most evident not just in our poor emissions and climate policies, but also in the fact the Australian government is hell-bent on sabotaging an entire industrial sector.
I honestly do not understand how the sabotage of the renewables industry in Australia – an all-out attack on a clearly promising and innovative sector – is not treated as a form of industrial treason.
We have had a set of politicians, under the influence of a dying industry, undermining one of the most promising areas of our own economy. They do so for the sole benefit of carbon diggers, at the expense of the rest of Australia, of the next generation and of the planet.
And the justification for this is all based on falsehoods and lies, straight from the PR team of the carbon industry. We hear arguments for energy security, energy poverty and clean coal; we hear that renewables undermine the reliability of the grid. It’s all absolute bullshit.
But, again, even here I think there is some hope. We have seen, over the last few years, an incredible coalition grow – one focused on the end of carbon mining, on protecting communities, on creating real jobs, and on supporting renewables.
Once-unthinkable coalitions of farmers and Aboriginal communities are fighting new mines, new attacks on sacred and fertile land and water.
We have intensive household investment in rooftop solar – and as the feed-in tariffs are undermined, those folks will increasingly invest in battery storage. And we’re finally seeing states move in this direction, with increasing development of utility-scale renewable and storage projects. As hard as the federal government and its allies resist, renewables are growing and the public supports this – even conservative voters.
This industry will be the innovator, the job creator, the future of this country’s energy system. That is a movement – a transformation – that now seems inevitable even in the face of the carbon industry, its political allies and their outright attacks on innovation.
There is one other important point to make in comparing the US and Australia – and maybe it is the most dire.
All of this talk, about the science, about the power of the denialist machine, about post-truth and the sabotage of renewables, is all about one side of the climate issue: emissions.
The other side, which is crucial to us here in Australia, is how we adapt to the climate change the denialist machine has baked into our future. This nice stable period of the last 10,000 years, the Holocene, in which humanity has evolved, built our cities, our infrastructure, our supply chains, the expectations of our everyday lives – is over.
Climate change means change, and Australia is already facing it in more severe ways than the US.
So adaptation is the next battle, and it must be just. We know who benefits from denialism and the sabotage of renewables. And it is pretty straightforward who will be harmed most if we don’t plan for coming change. We know who dies in heatwaves, for example – the poor, the elderly, those who live alone, those without resources.
This is happening right here. The Rockefeller-funded Resilient Sydney project found that the number one chronic stress is increasing health services demand, which is crucial to resilience in Western Sydney during heatwaves. If we don’t attend to that, vulnerable people will continue to die every time it heats up.
Australia needs to face up to adaptation planning on a large scale – rather than cut funds to the good work already being done. We need to focus on giving those most vulnerable to climate change a fair go by looking after their needs first.
One promising step is that the Sydney Environment Institute, with colleagues in Planetary Health and Public Health at the University of Sydney, are establishing a new research hub for NSW OEH on the Health and Social Impacts of Climate Change.
We have also partnered with Resilient Sydney to examine the actual experience of communities in shock events – the impacts on people and how policy responses can be improved. This work is all about adapting to the complex impacts of climate change in fair and just ways.
Overall, then, yes, Australia has industry-led denialists creating a madhouse effect, just as Mann writes about in the US.
But my hope is that we can use our broad political culture of respect for science and for the fair go to resist denialism and the coal profiteers, to implement a post-carbon energy transformation, and adapt fairly and justly to the inevitable changes the denial industry has locked in here.
Climate change is not something that will just go away. It is already affecting global biodiversity, food security and human migration, and the situation is not expected to improve soon. Rising temperatures and regular extreme events will produce new selection pressures.
These will force many species to move to find more suitable conditions, or adapt. Their ability to respond to these pressures will depend on the rate and extent of change, their ability to adapt to new conditions or their ability to move away. Understanding how biodiversity responds to climate change requires an interdisciplinary perspective, combining ecological, molecular and environmental approaches.
As part of our work to establish a new way of studying biodiversity, we developed an integrated framework to help guide conservation efforts by identifying wildlife populations under threat from climate change. We assign levels of risk to populations based on their exposure to changing climate conditions, their sensitivity due to genetic variation and their ability to alter their range (range shift potential).
We show how our approach can be applied in a bat species, the grey long-eared bat, Plecotus austriacus. This bat is one of the rarest mammals in the UK, with a population estimated at less than 1,000 individuals. This bat has also been in decline across Europe. Our previous work showed that its geographic distribution is limited by climate, and current patterns of genetic variation were shaped by changes to the climate. We collected wing biopsy samples for genetic analysis from eight populations in the Iberian Peninsula and two populations in England – the southern and northern edges of their range.
We used ecological modelling and climate data to look at where changes are likely to be most extreme. And to identify climate-driven genetic adaptations we looked at genomic data. This allowed us to assess which populations are likely to be most sensitive to the effects of climate change. Finally, we use a combination of genetic and geographic data to predict the ability of populations to track suitable conditions in the future.
We show that while conditions in the UK could actually improve for the bat, populations in southern Europe that hold the key to the survival of the species as a whole could be devastated. We identified those likely to be most sensitive to future changes because they do not contain enough climate-adaptive variation.
We also looked at landscape connectivity to show populations that will become isolated in the future. As the suitability of the environmental changes, the movement of individuals will be affected. This will limit the ability of populations to move to more suitable areas, and limit the chances of spreading adaptive genetic variation into populations that are at risk.
We identified one population, along the eastern coast of Spain, as being high risk. It will be exposed to high changes in the suitability of the climate, has a low levels of climate-adaptive genetic variation and will experience limited landscape connectivity.
We identified two other populations in the central regions of Spain that are medium-high risk. Despite high exposure to changes and limited connectivity, they have a higher frequency of adaptive genetic variation. In contrast, populations along the Atlantic coast of the peninsula and in the UK are at lower risk from climate change, because they will experience less change in the suitability of the climate, and keep higher landscape connectivity.
Implications for Conservation
Assigning levels of threat to populations can help us to set conservation priorities. Conservation management can focus on rescuing high risk populations. This could be by moving of the population to more suitable areas, or moving individuals with the right adaptive variation into the population.
But such intense management is likely to be costly and irrelevant when considering the number of species likely to be in need of these measures. Alternatively, we could focus on reducing threats to medium and medium-high risk populations by increasing landscape connectivity, this would allow range shifts and the spread of adaptive genetic variation.
Long-lived, slow-reproducing species with smaller population sizes are unlikely to adapt to climate change fast enough by spreading new mutations. They will depend on the spread of adaptive genetic variation caused by the movement of individuals between groups. Therefore a better understanding of movement processes and landscape connectivity is needed for predicting population persistence under climate change.
The framework we developed can be widely applied to other population groups and ecological systems to help decide how to focus conservation efforts to help species survive.
The best way of managing trees and forests for climate change and accounting for contributions of forests and forestry activities in carbon budgets remains hotly contested. Forests can either take up carbon dioxide (CO₂) or release more CO₂ into the atmosphere. Wood can substitute fossil fuels or energy-intensive materials, but forests are also large carbon reservoirs that add emission peaks if disturbed.
The atmospheric concentration of CO₂ has increased from a pre-industrial 280ppm (volume parts per million) to just above 407ppm – and will reach 550ppm by 2050. As the main greenhouse gas, CO₂ drives human-induced climate change. Most global CO₂ emissions come from burning fossil fuels, but net deforestation still adds about five billion metric tons of CO₂ per year.
Global deforestation is mainly determined by large-scale clearing of tropical forests, still progressing at some 3m hectares a year. In contrast, European forests have been cleared over many centuries and are now expanding, having grown by about 11m hectares since 1990. Regrowing forests on deforested land creates carbon sinks which remove CO₂ from the atmosphere.
Wood can reduce carbon emissions by being substituted for materials such as cement or metal, and replacing fossil fuels in energy generation. The CO₂ released when wood is burnt can be recouped by planting new trees, making wood a renewable source of energy.
Accounting for forests and forestry activities in carbon balance sheets is a controversial task. For example, the amount of timber harvesting that can be seen as sustainable is regularly contested, even among European countries. The increasing use of wood fuels in energy generation is also creating debatable outcomes.
Such controversies often boil down to a choice between locking up the existing carbon reservoirs in trees and forests, or growing forests into wood products that replace fossil fuel-intensive alternatives.
Young, rapidly growing forests remove atmospheric carbon quickly, but have relatively small carbon reservoirs. Ageing forests capture carbon at decreasing rates, but build up large carbon reservoirs in biomass and soils. When an older forest is logged, not only the wood is removed, but carbon from unused biomass and soil is also released back into the atmosphere, creating a “carbon debt”. Especially large, old trees store most carbon, but are often over 100 years old. Repayment of the carbon debt may, therefore, take a long time.
Theoretically, older forests reach an equilibrium, when carbon taken up into new growth is balanced by carbon released through decomposition processes. But this has been proved wrong. Even 800-year-old forests still continue to take up carbon, and, perhaps more surprisingly, individual large, old trees maintain high growth rates, too. Old forests are not only large carbon reservoirs worth maintaining, but actively continue to capture atmospheric carbon.
Protecting older forests
There are risks. First, we do not know for how long mature forests will continue to soak up additional CO₂ as atmospheric concentrations increase further and push forest ecosystems even faster into unchartered territory. To study mature forests in a future atmosphere requires large-scale experiments such as the Free Air CO₂ Enrichment (FACE) programme initiated by the Birmingham Institute of Forest Research. Only such elaborate (and rather expensive) technological marvels can supply the real-world data needed to answer this question.
Second, large-scale disturbances such as bushfires, drought dieback or pest epidemics, stop trees from taking up more carbon and also mobilise carbon from soils and decaying or burning trees. For example, forests in British Columbia, Canada, have turned from a carbon sink to a net carbon source following large-scale outbreaks of a native pine beetle. Very little is known about how environmental changes and rising CO₂ affect the vulnerability of trees and the resilience of forest ecosystems.
On the upside, in a country with low forest cover such as the UK, any sensible reforestation (avoiding bogs) is beneficial for carbon balance. Yet managing forests solely for their carbon benefit would miss the point. Especially older trees and forests provide a host of services, including biodiversity, flood mitigation, clean water and human well-being benefits.
Any policy incentives must aim at balanced outcomes for all forest goods and services. Incentives that commodify one service but not others, too often create unintended consequences. Where forests are concerned, such mistakes are expensive, because it takes a long time to reverse adverse effects on old trees and forests.
I’ve wanted to be a scientist since I was five years old.
My idea of a scientist was someone in a lab, making hypotheses and testing theories. We often think of science only as a linear, objective process. This is also the way that science is presented in peer reviewed journal articles – a study begins with a research question or hypothesis, followed by methods, results and conclusions.
It turns out that my work now as a climate scientist doesn’t quite gel with the way we typically talk about science and how science works.
Climate change, and doing climate change research, has changed the way I see and do science. Here are five points that explain why.
Falsifiability is the idea that an assertion can be shown to be false by an experiment or an observation, and is critical to distinctions between “true science” and “pseudoscience”.
Climate models are important and complex tools for understanding the climate system. Are climate models falsifiable? Are they science? A test of falsifiability requires a model test or climate observation that shows global warming caused by increased human-produced greenhouse gases is untrue. It is difficult to propose a test of climate models in advance that is falsifiable.
This difficulty doesn’t mean that climate models or climate science are invalid or untrustworthy. Climate models are carefully developed and evaluated based on their ability to accurately reproduce observed climate trends and processes. This is why climatologists have confidence in them as scientific tools, not because of ideas around falsifiability.
2. There’s lots of ways to interpret data
Climate research is messy. I spent four years of my PhD reconstructing past changes in Australian and Indonesian rainfall over many thousands of years. Reconstructing the past is inherently problematic. It is riddled with uncertainty and subject to our individual interpretations.
During my PhD, I submitted a paper for publication detailing an interpretation of changes in Indonesian climates, derived from a stalagmite that formed deep in a cave.
My coauthors had disparate views about what, in particular, this stalagmite was telling us. Then, when my paper was returned from the process of peer review, seemingly in shreds, it turns out the two reviewers themselves had directly opposing views about the record.
What happens when everyone who looks at data has a different idea about what it means? (The published paper reflects a range of different viewpoints).
Another example of ambiguity emerged around the discussion of the hiatus in global warming. This was the temporary slowdown in the rate of global warming at the Earth’s surface occurring roughly over the 15 year period since 1997. Some sceptics were adamant that this was unequivocal proof that the world was not warming at all and that global warming was unfounded.
There was an avalanche of academic interest in the warming slowdown. It was attributed to a multitude of causes, including deep ocean processes, aerosols, measurement error and the end of ozone depletion.
Ambiguity and uncertainty are key parts of the natural world, and scientific exploration of it.
3. Sometimes the scientist matters as well as the results
I regularly present my scientific results at public lectures or community events. I used to show a photo depicting a Tasmanian family sheltering under a pier from a fire front. The sky is suffused with heat. In the ocean, a grandmother holds two children while their sister helps her brother cling to underside of the pier.
After a few talks, I had to remove the photo from my PowerPoint presentation because each time I turned around to discuss it, it would make me teary. I felt so strongly that the year we were living was a chilling taste of our world to come.
Just outside of Sydney, tinderbox conditions occurred in early spring of 2013, following a dry, warm winter. Bushfires raged far too early in the season. I was frightened of a world 1°C hotter than now (regardless of what the equilibrium climate sensitivity turns out to be).
At public lectures and community events, people want to know that I am frightened about bushfires. They want to know that I am concerned about the vulnerability of our elderly to increasing summer heat stress. People want to know that, among everything else, I remain optimistic about our collective resilience and desire to care for each other.
Communicating how we connect with scientific results is also important part of the role of climate scientists. That photo of the family who survived the Tasmanian bushfire is now back in my presentations.
4. Society matters too
In November 2009, computer servers at the University of East Anglia were illegally hacked and email correspondence was stolen.
A selection of these emails was published publicly, focusing on quotes that purported to reveal dishonest practices that promoted the myth of global warming. The “climategate” scientists were exhaustively cleared of wrongdoing.
On the surface, the climategate emails were an unpleasant but unremarkable event. But delving a little deeper, this can be seen as a significant turning point in society’s expectations of science.
While numerous fastidious reviews of the scientists cleared them of wrongdoing, the strong and ongoing public interest in this matter demonstrates that society wants to know how science works, and who “does” science.
There is a great desire for public connection with the processes of science and the outcomes of scientific pursuits. The public is not necessarily satisfied by scientists working in universities and publishing their finding in articles obscured by pay walls, which cannot be publicly accessed.
A greater transparency of science is required. This is already taking off, with scientists communicating broadly through social and mainstream media and publishing in open access journals.
Enlisting non-expert volunteers allows researchers to investigate otherwise very difficult problems, for example when the research would have been financially and logistically impossible without citizen participation.
The OzDocs project involved volunteers digitising early records of Australian weather from weather journals, government gazettes, newspapers and our earliest observatories. This project provided a better understanding of the climate history of southeastern Australia.
Personal computers also provide another great tool for citizen collaborators. In one ongoing project, climate scientists conduct experiments using publicly volunteered distributed computing. Participants agree to run experiments on their home or work computers and the results are fed back to the main server for analysis.
While we often think of scientists as trained experts working in labs and publishing in scholarly journals, the lines aren’t always so clear. Everyone has an opportunity to contribute to science.
My new book explores this space between the way science is discussed and the way it takes place.
This isn’t a criticism of science, which provides a useful way to explore and understand the natural world. It is a celebration of the richness, diversity and creativity of science that drives this exploration.
Some areas are having their hottest temperatures since 2007 when severe heat also brought dangerous conditions to the southeast of the continent.
The heat is associated with a high pressure system over southeast Europe, while the jet stream guides weather systems over Britain and northern Europe. In 2007 this type of split weather pattern across Europe persisted for weeks, bringing heavy rains and flooding to England with scorching temperatures for Greece and the Balkans.
Europe is a very well-studied region for heatwaves. There are two main reasons for this: first, it has abundant weather observations and this allows us to evaluate our climate models and quantify the effects of climate change with a high degree of confidence. Second, many leading climate science groups are located in Europe and are funded primarily to improve understanding of climate change influences over the region.
To understand the role of climate change in the latest European heatwave, I looked at changes in the hottest summer days over southeast Europe – a region that incorporates Italy, Greece and the Balkans.
I calculated the frequency of extremely hot summer days in a set of climate model simulations, under four different scenarios: a natural world without human influences, the world of today (with about 1℃ of global warming), a 1.5℃ global warming world, and a 2℃ warmer world. I chose the 1.5℃ and 2℃ benchmarks because they correspond to the targets described in the Paris Agreement.
As the heatwave is ongoing, we don’t yet know exactly how much hotter than average this event will turn out to be. To account for this uncertainty I used multiple thresholds based on historically very hot summer days. These thresholds correspond to an historical 1-in-10-year hottest day, a 1-in-20-year hottest day, and a new record for the region exceeding the observed 2007 value.
While we don’t know exactly where the 2017 event will end up, we do know that it will exceed the 1-in-10 year threshold and it may well breach the higher thresholds too.
A clear human fingerprint
Whatever threshold I used, I found that climate change has greatly increased the likelihood of extremely hot summer days. The chance of extreme hot summer days, like this event, has increased by at least fourfold because of human-caused climate change.
My analysis shows that under natural conditions the kind of extreme heat we’re seeing over southeast Europe would be rare. In contrast, in the current world and possible future worlds at the Paris Agreement thresholds for global warming, heatwaves like this would not be particularly unusual at all.
There is also a benefit to limiting global warming to 1.5℃ rather than 2℃ as this reduces the relative frequency of these extreme heat events.
As this event comes to an end we know that Europe can expect more heatwaves like this one. We can, however, prevent such extreme heat from becoming the new normal by keeping global warming at or below the levels agreed upon in Paris.
You can find out more about the methods used here.