Tag archive: CBA

Climate Change Is A Financial Risk, According to A Lawsuit Against the CBA

Anita Foerster, University of Melbourne and Jacqueline Peel, University of Melbourne

The Commonwealth Bank of Australia has been in the headlines lately for all the wrong reasons. Beyond money-laundering allegations and the announcement that CEO Ian Narev will retire early, the CBA is now also being sued in the Australian Federal Court for misleading shareholders over the risks climate change poses to their business interests.

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.


Read more: Why badly behaving bankers will never fear jail time


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.


Read more: How companies are getting smart about climate change


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.


Read more: We need a Royal Commission into the banks


The claim also zeros in on the lengthy speculation over whether the CBA would finance the controversial Adani Carmichael coal mine in Queensland. (The bank has since ruled out financing the mine.) The shareholders assert that the resulting “controversy and concern” was a major risk to the CBA’s business.

Global litigation trends

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.

The ConversationHutley 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.

Anita Foerster, Senior Research Fellow, University of Melbourne and Jacqueline Peel, Professor of Environmental and Climate Law, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Commonwealth Bank

News: CBA Deposit Interest Rates Cuts Hit Savers

Commonwealth Bank (CBA) has cut a range of term deposit interest rates for the second time since August.

The bank blamed the cuts, which took effect last week, on changes in credit markets and the globally low- interest rate.

The rate cuts apply to six-term deposit products, spanning from three months to five years, by 5 to 15 basis points.

“The reason we have made changes to interest rates on some deposit accounts is due to the record-low interest rate environment, changes in underlying funding costs in local and international funding markets, and competitive conditions that affect the interest rates we are able to pay,” said Clive van Horen, executive general manager of retail products and strategy at CBA.

In August, CBA raised deposit rates and marketed it as a win for savers after the Australia’s big four banks passed on half of the Reserve Bank of Australia’s rate cuts to mortgage holders.

CBA reversed these cuts in September, and ANZ, NAB, and Westpac followed suit in October.

CBA

News: CBA Delivers $2.4 Billion for First Quarter Profit

Commonwealth Bank of Australia has recorded a $2.4 billion profit in its first quarter, with slight slowdown in income growth compared to the previous year.

CBA said the decline was due to the falling interest rates, stronger currency and higher insurance claims.

In total, CBA’s full-year cash profit to June 30 amounted to $9.45 billion.

Westpac announced on Monday that its full-year profit amounted to $7.82 billion, while National Australia Bank delivered $6.48 billion and ANZ reported 18 per cent decline in profit to $5.9 billion.

Alipay CBA

News: Alipay Enters Australian Market With Commonwealth Bank Partnership

Commonwealth Bank of Australia have signed an agreement with third-party payment platform Alipay to allow Chinese tourists and students to use Alipay in Australia.

The deal will also enable Australians to use Alipay for purchases over AliExpress, a platform for Chinese merchants to reach global consumers.

“We are constantly working on payment solutions that offer flexibility and choice for our customers so the prospect of bringing them closer to a globally leading mobile payments provider, and its 450 million active users, is truly exciting,” said Kelly Bayer Rosmarin, group executive of institutional banking and markets at CBA.

Alipay said the deal is targeted at the 19,000 Chinese tourists who visit Australia every week.

“Australia is a popular destination for Chinese travellers and Chinese students studying overseas,” said Douglas Feagin, senior vice-president at Ant Financial Services and head at Alipay International. “We want Alipay users to enjoy the kind of convenience they are used to at home.”

Alipay’s parent company, Ant Financial was valued at $US75 billion in September.

China is the world’s largest market for mobile payment, with a transaction volume of $US235 billion in 2015.