Obligations on Australian Companies to Address Climate Change

Australia's nationally determined contribution submitted under the Paris Agreement evidences a commitment to reducing greenhouse gas emissions by 26%-28% below 2005 levels by 2030; building on Australia's commitment under the Kyoto Protocol to reduce greenhouse gas emissions by 5% below 2000 levels by 2020. This target cannot be reached without significant measures to mitigate emissions from Australia's largest emissions sources: the private sector. Currently, Australia's legal frameworks impose limited express obligations on Australian companies to reduce emissions, leading to significant debate on the legal obligations of companies to tackle climate change. However, increasing shareholder activism and investor demands on companies to act in alignment with Australia's Paris Agreement targets (and the goals of the Paris Agreement at large) has led to a clear consensus on enhanced legal obligations, beyond specific climate laws, to companies in addressing climate risk. Specifically, the way in which companies law is now being interpreted means that there is an increasing body of law requiring companies and their directors to demonstrate good governance with respect to addressing climate change, managing change risk, and related disclosures. With the Paris Agreement setting not only the direction of global climate change policy, but also stakeholder expectations in this regard, it is our view that legal obligations of the nature discussed in this article are only set to increase, placing more stringent mandatory climate responsibilities on companies, both within Australia and internationally.