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Further statements from regulators and commentators reinforce the expectation that businesses will consider the materiality of climate change-related risks and disclose them accordingly. The obligations are not new, but rather the expected nature of action to satisfy existing obligations continues to evolve in relation to climate change.

The expectations of financial services businesses in this regard is underlined by the Australia Prudential Regulation Authority (APRA) in its draft Prudential Practice Guide on Climate Change Financial Risks. A further opinion by Mr Hutley SC and James Mack on superannuation trustees’ duties regarding climate risk and disclosure has also been released updating their 2017 opinion.

Separately, Mr Hutley SC and Sebastian Hartford Davis have released a further supplementary opinion to their 2016 and 2019 opinions regarding directors’ duties relevant to climate change. The 2021 update on directors’ duties addresses the potential risk of ‘greenwashing’ litigation risk.


  • Climate change presents a unique set of risks for a broad spectrum of businesses, including lenders, insurers and superannuation. Such risks span the long-term impact of a changed climate through to regulatory and market risks.
  • In relation to financial services, APRA underlines existing requirements for lenders, insurers and superannuation businesses to identify and address risks in their activities, including those stemming from climate change.
  • Similarly, the Hutley SC and Mack February 2021 opinion advises that superannuation trustees have a positive duty to identify and understand climate-related risks when investing on behalf of members (including by seeking out expert evidence).
  • The April 2021 Hutley SC and Hartford Davis opinion expands on the nature of directors’ duties more broadly, advising that directors must ensure positive action is taken to address climate-related risks, while also making sure that these activities are not ‘greenwashed’.

APRA releases draft climate change financial risk guidelines

APRA has released a draft Prudential Practice Guide on Climate Change Financial Risks for comment (Guide).

The Guide does not impose any new requirements on APRA-regulated businesses in relation to climate risk, but is instead intended to support compliance with APRA’s existing risk management requirements. The Guide builds upon the framework established by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), which is increasingly being adopted as a mandatory reporting standard worldwide (including in the United Kingdom and New Zealand).

The Guide recognises that while climate-related risks can be managed within businesses’ existing risk management frameworks, climate change presents a number of unique elements which distinguish it from other risks. These include:

  • the potential for irreversible changes which may be difficult to mitigate or reverse;
  • the far-reaching impacts of climate change, across different sectors, business types and locations;
  • the uncertain and extended timeline over which risks may eventuate, which may extend beyond business planning cycles; and
  • the unprecedented nature of climate change and lack of historical data to anticipate and mitigate risks.

The Guide provides the following advice on managing financial risks presented by climate change:


  • Boards should understand and regularly assess financial risks presented by climate change, taking both a long and short-term view.
  • This duty can be delegated, but businesses should ensure appropriate mechanisms are in place for monitoring.
  • Boards should ensure that there is adequate opportunities to discuss climate-related risks.
  • Board should set clear roles and responsibilities for management of climate-related risks.

Risk management

  • Boards should document management of climate risks within risk management policies, management information and board risk reports.
  • Boards should identify economic sectors with higher or lower exposures to climate risks and develop sector-specific policies when investing or insuring within that sector.


  • A lack of certainty in relation to the future impact of climate risks is not a reason to avoid disclosure of the exposure to these risks.
  • Beyond statutory or regulatory requirements, businesses should consider whether additional voluntary disclosures would enhance transparency and give confidence in the market.

Noel Hutley SC and James Mack advise that superannuation trustees must address climate risks

Mr Hutley SC and Mr James Mack have been briefed by Equity Generation Lawyers to supplement their 2017 guidance on climate-change risk disclosure to consider the responsibilities of superannuation trustees in the context of climate change.

In the advice dated 16 February 2021, they advise that due to the ‘ascertainable’ and likely material financial risk of climate change, superannuation trustees must ensure their ‘…processes, structures and expertise’ respond to climate change risks.

In order to do so, and to comply with the duties in sections 52(2)(b) and (c) of the Superannuation Industry Supervision Act 1993 (Cth), Mr Hutley SC and Mr Mack advise that trustees must:

  1. understand the risk posed by climate change to investments; and
  2. manage any identified risk.

This process may involve ongoing commissioning of expert evidence to inform trustees’ understanding of the risks posed by climate change.

Positive action on climate change required to fulfill directors’ duties

Separately, a further supplementary opinion of Mr Hutley SC and Mr Sebastian Hartford Davis for the Centre for Policy Development has been released, addressing climate change and directors’ duties. Mr Hutley SC and Mr Hartford Davis advise that it is no longer adequate for directors to simply consider and disclose climate-related risks. Directors are now expected to take reasonable steps to ensure that positive action is taken to address climate-related risks. However, this duty is not without risk. Businesses are warned against ‘greenwashing’ climate-related statements or risk misleading and deceptive conduct claims. The opinion concludes that the risk of ‘greenwashing’ litigation is real.

Emergence of greenwashing litigation in the United States

The identified risk of ‘greenwashing’ litigation is borne out by the recent filing of proceedings in the United States against Exxon Mobil Corp, Shell Oil Company, BP America Inc and others alleging breaches of consumer protection laws by ‘greenwashing’ climate change disclosures. This includes allegations of exaggerating investments in clean energy and inflating benefits of natural gas products. The potential for success of this type of claim in the United States, and ability to translate into other regulatory settings, remains to be seen.

Next steps

The APRA Guide is open for comment until 31 July 2021 and can be found here.

Please get in touch if you would like to discuss implications for your business.

By Heidi Asten, Partner, Timothy Stutt, Partner and Brigitte Rheinberger, Solicitor.

Heidi Asten photo

Heidi Asten

Partner, Melbourne

Heidi Asten
Timothy Stutt photo

Timothy Stutt

Partner, Sydney

Timothy Stutt

Key contacts

Heidi Asten photo

Heidi Asten

Partner, Melbourne

Heidi Asten
Timothy Stutt photo

Timothy Stutt

Partner, Sydney

Timothy Stutt
Heidi Asten Timothy Stutt