By EDO Managing Lawyer Kirsty Ruddock & Senior Solicitor Zoe Bush
Last year, the EDO on behalf of its client, the Australasian Centre for Corporate Responsibility, brought a world-first case against Santos Limited for its allegedly misleading net zero emissions claim. [1]
While expanding its fossil fuel production, Santos claimed it had a credible plan to achieve net zero emissions by 2040.
But according to a groundbreaking United Nations report released on November 9, such claims can’t get us to net zero emissions. [2]
Entitled “Integrity Matters”, the report outlines the findings of the United Nations High-Level Expert Working Group on the net-zero commitments of non-state entities.
Its findings are clear: corporations cannot claim to be net zero while continuing to invest in or build new fossil fuel supply.
As the report plainly states: “Net zero is incompatible with continued investment in fossil fuels”, which account for “over 75% of global greenhouse gas emissions”.
This sends a strong message to many Australian companies who are expanding fossil fuel production while simultaneously boasting about their ‘green’ credentials: walk away from fossil fuels, or abandon the pretense you are part of the climate solution.
This doesn’t just concern a few rogue outliers – as at October 2021, Australia had 72 new coal projects under development, which would double our current coal production, and 44 new gas and oil projects.
The report also spells trouble for companies that rely heavily on offsets to reduce their emissions, such as Woodside, Qantas and Telstra. [3]
It concludes that companies must prioritise “urgent and deep reductions of emissions across their value chain”.
Critically, not even high-integrity carbon credits can be counted toward a company’s net zero target, let alone the 70-80% of Australian Carbon Credit Units that the former chair of the Integrity Committee of Australia’s Emissions Reduction Fund has described as “devoid of integrity”. [4]
This will no doubt be a gamechanger, given around 60% of emissions ‘reductions’ committed by the world’s largest corporations are in the form of offsets. [5]
The UN report will also have major implications for banks, financiers and super funds who also claim to be ‘net zero’ or aligned with the Paris Agreement.
The report states that financial institution’s net-zero plans must include an immediate end to lending, underwriting and investments in any company planning new coal infrastructure, power plants and mines.
They must also include a commitment to end financing and investing in support of exploration of new oil and gas fields, expansion of oil and gas reserves, and oil and gas production.
This has significant implications for each one of Australia’s big four banks.
NAB currently continues to finance both Whitehaven Coal and Santos, who both have expansion plans.
Westpac is financing Woodside’s Pluto 2 LNG project, and ANZ is providing corporate finance for Woodside, Santos, Cooper Energy, Beach Energy and APA, who all have gas expansion plans.
Shortly before this week’s launch of the UN report, shareholders voted down a resolution that required Commonwealth Bank to stop funding new coal and gas projects.
Banks aren’t the only ones implicated. In August 2022, EDO wrote on behalf of HESTA members Rod and Sue Campbell-Ross to HESTA about its continued investment in Woodside and Santos despite claiming to be net zero and Paris-aligned. [6]
Similarly, we wrote on behalf of a UniSuper member to UniSuper about their investments in Santos. [7]
Banks and super funds will need to urgently make major changes to their net-zero plans to comply with these recommendations and ensure investors are not misled.
Indeed, it is difficult to overstate the significance of the UN’s report for Australian companies.
About 70% of the ASX200’s market-capitalisation is now covered by net-zero claims.
Many of these depend on the exact mechanisms the UN has concluded are inconsistent with achieving net-zero emissions.
The permeation of potentially misleading information threatens the stability of the Australian economy and leaves investors vulnerable to major losses. The Australian Consumer and Competition Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) both prioritising greenwashing could not come at a more pressing time.
Most importantly, misleading net-zero claims can impede an effective and timely response to the climate crisis.
This week, world leaders gathered at COP27 in Egypt to consider how to limit global warming to 1.5 degree in accordance with the Paris Agreement.
Current pledges by parties to the Agreement put the world on track for around 2.5 degrees warming by the end of the century, meaning significant emissions reductions are still required to mitigate against the worst impacts of climate change.
Billions of people around the world are already experiencing the consequences of failing to do so.
In the past decade, Australians have lived through the extremes of bushfires, record droughts and devastating floods.
Recent floods in Pakistan submerged one-third of the country in water and displaced 300 million people – more than 10 times Australia’s total population. At the same time, communities around the world – including in China, Western Europe and Africa – are suffering severe droughts and heatwaves. In Africa, tens of millions now face starvation. [8]
Earlier this year, the UN’s Intergovernmental Panel on Climate Change issued its starkest warning yet: it is ‘now or never’ if the world is to avoid further, irreversible harm. We’ve already wasted precious decades to climate denialism, at enormous cost. We don’t have time for obfuscation or delay. In the words of the UN, “it is time to draw a red line around greenwashing”.
References
[1] Australasian Centre for Corporate Responsibility expands landmark Federal Court case against Santos, EDO, 25-8-22.
[2] Integrity matters: Net zero commitments by businesses, financial institutions, cities and regions. Report from the United Nations’ high-level expert group on the net zero emissions commitments of non-state entities, November 2022.
[3] How we went carbon neutral, Telstra blog, 9-7-22
[4] ‘Untenable’: even companies profiting from Australia’s carbon market say the system must change, 09-09-22, The Conversation.
[5] Assessing the transparency and integrity of companies’ emission reduction and net-zero targets, Corporate Climate Responsibility Monitor, February 2022.
[6] HESTA’s fossil fuel investments may amount to a breach of the law, EDO, 10-08-22.
[7] UniSuper faces legal challenge over Santos stake, Australian Financial Review, 29-08-22.
[8] Horn of Africa drought places 22 million people at risk of starvation, says UN, 20-08-22, The Guardian.
