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Australian government is acting illegally by not addressing climate change

The Australian government is acting illegally by not addressing climate change. Source: Getty

Business leaders and government officials are failing to meet their legal obligations by not addressing climate change, former Banking Royal Commissioner Kenneth Hayne has declared. 

Australia’s prime minister, Scott Morrison, has been failing to address climate change, and NSW Premier Gladys Berejiklian is telling all those who ask to discuss the topic: “not today”.

But Hayne says climate change is legally the government’s responsibility. 

“I think the relevant law is clear,” Hayne told the Centre for Policy Development’s private climate roundtable.

“Directors must act in the best interests of the company. ‘Best interests’ is not one‑dimensional – it is not determined only by share price movement or ‘total shareholder return’ over a period.”

And this “best interests” duty, Hayne said, did not solely refer to the interests of shareholders: rather, it referred to the interests of society as a whole.

This is because the increasing climate risk means the interests of shareholders and the interests of society were converging, Hayne stated.

“The longer the period of reference, the more the interests of all affected by a company’s actions will converge in pursuit of the long‑term financial advantage of the enterprise.”

Therefore, the government was indeed breaching the law by not keeping its duty to act in the best interests of society.

Hayne said politicians had wrongly framed the climate change debate as a choice between a strong economy or a healthy environment, describing this as “short-termism”.

“At the national level short‑termism is expressed as: ‘Doing something now will have adverse effects on employment in some part or parts of the country. That would be bad for the national economy. Therefore, we will do nothing’,” he said.

That same short-termism could be seen in company boards, Hayne said, as they label climate change a non-financial risk.

“Boards might think that they can do that if they see the risk as not being immediately realised in the next financial period,” Hayne said.

“But as recent events in the financial services industry should have shown, the notion of ‘non‑financial’ risks can be very misleading.”

And this too was a breach of best interests duties. 

“Neither helplessness nor short‑termism provides any answer to the director’s duty to act in the best interests of the company. 

“Indeed, each points plainly towards the need for boards to recognise both the nature and extent of climate‑related risks and the speed with which change will have to be made; to develop strategic plans in response; and to report to shareholders and the wider market about what they have done, are doing and will do in response.”

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