Catherine Rossiter v ANZ Group Holdings Limited
Federal Court of Australia | NSD1315/2023
Equity Generation Lawyers represented ANZ shareholder Catherine Rossiter in an application for preliminary discovery in the Federal Court of Australia. Mrs Rossiter sought copies of ANZ’s internal risk management framework because of her concerns the bank may not be properly managing the twin risks of climate change and biodiversity loss.
The action was filed on 9 November 2023. It was discontinued by consent with no order as to costs on 22 April 2024.
ANZ’s risk profile
Since 2016, ANZ has reportedly loaned A$18.6bn to fossil fuels. It recently increased lending to fossil fuel projects whilst its peers significantly reduced theirs.
Analysis reveals that ANZ loaned A$2.6bn in 2022 to fossil fuel projects, up from A$2bn in 2021. In contrast, CBA significantly reduced its lending to A$267m in 2022 from A$1.3bn in 2021.
Furthermore, ANZ and its shareholders are significantly exposed to risks stemming from biodiversity loss. ANZ reported its aggregate exposure to the agriculture, forestry, fishing and mining sectors – being those generally highly dependent on biodiversity – as A$52.1bn in 2022.
The World Economic Forum recently recognised that biodiversity loss is among the top global risks to society; it is a systemic and financial risk, material to a number of sectors. Australia’s economy is heavily reliant on nature. Approximately half of Australia’s GDP (49.3% or A$892.8 billion) has a moderate to very high direct dependence on nature.
The basis of the claim
Experts agree that climate change and biodiversity loss are material risks to financial institutions. Material risks are those that could have a material impact, both financial and non-financial, on an institution, its depositors and its shareholders.
Australia’s financial services laws require ANZ and other banks to properly identify and manage material risks in their risk management frameworks. Our client was concerned, based on disclosures in ANZ’s 2022 and 2023 Annual Reports, that the bank may not have been satisfying governance standards when dealing with the risks of climate change and biodiversity loss.
Specifically, APRA’s Prudential Standard CPS-220 Risk Management requires, amongst other things, ANZ to maintain a risk management strategy, or RMS, that addresses material risks. At the time of filing our client was concerned that neither climate change nor biodiversity loss appeared to be addressed as stand-alone material risks in ANZ’s RMS, which is a board-approved document that gives effect to the organisation’s approach to managing risk.
The practical effect of such an omission is that ANZ may have been failing to adequately measure, evaluate, monitor, control and mitigate those risks. This, in turn, could affect shareholder value through exposure to the physical and transition risks associated with climate change and biodiversity loss.
Remedy and outcome
Mrs Rossiter sought information from ANZ by way of preliminary discovery about its risk management systems to enable her to determine whether the bank’s governance systems adequately dealt with climate change and biodiversity risks.
ANZ published its 2023 annual report on 13 November 2023. The report stated that “[o]n 9 November 2023 our Board Risk Committee approved that ‘climate risk’ will be elevated as a key material risk” (p. 29). It also noted that going forward the bank is “further strengthening our enterprise-wide approach to managing climate risk. We are working to embed this change and expect to disclose our progress in our 2024 reporting.” (p. 29).
ANZ acknowledged the bank was “[c]ontinuing to evolve our strategy, policies, processes, products and services to seek to manage the risks and opportunities associated with climate change and nature, including biodiversity loss” (p. 8).
Mrs Rossiter discontinued the proceedings on 22 April 2024.
Ms Rossiter’s legal representatives
Ms Rossiter was represented by Equity Generation Lawyers.
Her counsel was Jane Taylor.
