Chapter 3. Sources of Pressure in Australia
Introductory articles on emerging exposures, risk mitigation and
insurance risk transfer for clients of Omnisure.
A compendium of introductory ESG articles on emerging exposures, risk mitigation and insurance risk
transfer for clients of Omnisure with claims examples.
Martin Birch – March 2022
Australia has a federal system of government, in which there is a federal or Commonwealth legislature that has power to pass laws on matters listed in the Constitution. According to the Global legal Group 1, the states and territories are separate jurisdictions with their own legislatures. ESG-related matters are addressed across a wide variety of Commonwealth and state and territory laws2. An excellent resource which has been consulted for this chapter can be found here.3
The Commonwealth Corporations Act 2001 (Corporations Act) is the principal piece of legislation regulating Australian companies and sets out an overall framework for their governance. This includes requirements relating to the minimum numbers of directors, record-keeping and financial reporting, as well as directors’ and officers’ duties.
Environmental compliance is regulated at both the Commonwealth and state and territory levels of government and there are several substantive environment legislative regimes at both levels, as well as related matters regulated by local government. There is a range of regulation coordinated between the Commonwealth, states and territories relating to contamination, waste and sustainability matters such as packaging. A general environmental duty to minimise risk of harm applies in a number of jurisdictions, backed by varying levels of enforcement powers 4. Each state and territory has its own approach to environmental impact assessment and licensing legislation. At the Commonwealth level, environmental impact assessment for matters of national environmental significance is regulated under the Environment Protection and Biodiversity Conservation Act 1999.5 Carbon emissions from major facilities are regulated through the Safeguard Mechanism statutory rule administered by reference to reporting obligations under the Commonwealth National Greenhouse and Energy Reporting Act 2007, with renewable energy and emissions reduction targets or requirements set under a range of legislation across the jurisdictions.
Native title land rights of Aboriginal and Torres Strait Islander peoples are addressed under the Commonwealth Native Title Act 1993, with corresponding legislation in states and territories.6 Potential impacts to Aboriginal cultural heritage are predominantly addressed through state and territory legislation, although Commonwealth legislation also applies. There are also non-litigious pathways for the recognition of traditional owners’ rights, such as the Traditional Owner Settlement Act 2010 in Victoria.
Australian labour law and workers’ rights are enshrined in both Commonwealth and state and territory legislation. The vast majority of Australian employees are covered by the Fair Work Act 2009, which creates the national workplace relations system. This national workplace relations system establishes 11 minimum National Employment Standards that must be provided to all employees covered by the Fair Work Act, as well as the national minimum wage and awards that apply across Australia for specific industries and occupations.
Please also refer to our Foundation Document 7 for more information Safe Work Australia, human rights, and ESG disclosure regulations.
Our Foundation Document discusses the remit of various government agencies and regulatory authorities are concerned with specific ESG issues. It discussed the role of ASIC under governance of Australian corporations and financial markets conduct regulator. It discussed APRA in its role as the prudential regulatory oversight of financial institutions in the banking, insurance and superannuation industries. APRA has been increasingly involved in developing the financial sector’s approach to managing climate-related risks, given the issue’s significance for the prudential management, and potentially capital adequacy, of key financial institutions into the future. It also deals with enforcement and explains that most environmental laws provide for liability of directors and officers for offences committed by a company. ASIC is the primary corporate regulator and has a number of avenues for bringing enforcement action, including potential action for breaches of directors’ duties, market disclosure laws and corporate accountability requirements applying under the Corporations Act.
Our Foundation Document sets out a very detailed Minter Ellison Lawyers publication on how legal action, or the credible threat thereof, can be brought to drive climate adaptation (so-called ‘ex-ante legal action’) OR as a consequence of maladaptation or failing to act (so-called ‘ex-post legal action’) after the physical impact or physical risk of a changing climate increasingly materialises. 8
Some examples of this ex-post legal action include:
- tort claims in negligence or nuisance; breach of statutory duty; regulatory enforcement by financial regulators of securities and corporate governance laws; community or regulatory enforcement of environmental and pollution laws;
- shareholder action for misleading disclosure/securities fraud or breach of fiduciary duty;
- tort claims in negligence, nuisance or trespass; and human rights or constitutional law claims, including uncompensated takings claims; cost implications of investigating the liability of insureds and/or third parties for damage; litigation associated with establishing the liability of insureds, governmental instrumentalise and/or third parties for damage;
- revenue implications associated with reduced policy offerings and refusal to insure properties in high-risk areas; breach, avoidance or repudiation of contract, contractual warranties or performance standards; force majeure or frustration of contract.
The risk of litigation is extremely real. Leading legal opinion by Noel Hutley SC and Sabastian Hartford David (“the Hutley Opinion”) have been published on directors duties with regard to climate change. Sarah Barker from Minter Ellison Lawyers instructed the on the brief for the Hutley Opinion. They produced a revised legal opinion describing that developments in the ESG environment have accelerated their initial legal opinion on Directors Duties9. To this end please refer to our Foundation Document which provides further detail on Greenwashing, Superannuation Funds and more as set out by the Hutley Opinion.
1 Global Legal Group (GLG) is an independent, London-based media company specialising in the legal and strategic business sectors providing legal, regulatory and policy information to senior executives, general counsel, law firms and government agencies through print & digital channels. ICLG.com is a leading global platform for legal reference, analysis and news, hosting comprehensive comparative legal guides and research tools. In short, they are a Publisher. ICLG.com also forms an international network of legal experts who, by contributing their expertise, reach a wide readership of legal and business professionals around the world.
5 The Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act) is the Australian Government’s central piece of environmental legislation. It provides a legal framework to protect and manage nationally and internationally important flora, fauna, ecological communities and heritage places – defined in the EPBC Act as matters of national environmental significance.
7 Our Foundation Document is the original full text version of “ESG Discussions – Introductory articles on emerging exposures, risk mitigation & insurance risk transfer” for clients of Omnisure, compiled by Martin Birch. Register on our website for a full copy.
8 Legal action as a driver and consequence of climate-related physical risk adaptation – “Liability risk and adaptation finance”. Published by Minter Ellison in partnership with UN environment programme. https://www.unepfi.org/wordpress/wp-content/uploads/2021/04/UNEPFI-Climate-Change-Litigation-Report-Lowres.pdf. Accessed 21.01.2022.
Please contact Martin Birch for a copy of the full-text Foundation Document at firstname.lastname@example.org