A new normal: Climate and cybersecurity risks in financial disclosures

Par Yves Faguy août 9, 20179 août 2017

A new normal: Climate and cybersecurity risks in financial disclosures
Photo by Alex Gindin on Unsplash

 

 

Kevin LaCroix, discussing directors' and officers' liability, points to some telling signs of the times:

One of the fundamental principles on which our system of securities regulation is based is the importance of disclosure. The system is built on the notion that companies must disclose certain basic information about their operations and performance so that investors can make informed investment decisions. While the disclosures required are a matter of regulation and statute, investors’ and regulators’ expectations about what must be disclosed changes over time. Signs are that disclosure expectations  — and as a result disclosure practices — are changing rapidly in two particular areas: cybersecurity and climate change.

As if to underline the point, Australia's top bank is now the target of a shareholder suit over climate change risks. As The Guardian reports, the case marks a first test to gauge how courts will hold companies to account on disclosure requirements that should be identified in their annual reports:

The move comes six months after the Australian financial regulator warned climate change poses a material risk to the entire financial system, and called for companies to report on climate change-related risks as financial risks.

The sorts of risks the Commonwealth Bank might face as a result of climate change are diverse, said David Barnden, a lawyer at Environmental Justice Australia.

“CBA has exposure to the Australian economy in general. We could be talking about anything from extractive projects to the housing market, which might face risks from sea level rise,” Barnden said.

Reputational risks for the bank as the economy moves away from fossil fuels could also be significant, Barnden said, with the shareholders raising concerns about the bank’s position on funding Adani’s proposed Carmichael coalmine and associated infrastructure.

 

 

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