Climate Change & Sustainability

Keeping clean on climate risk

Climate risk is increasingly relevant to directors' duties. With mandatory climate-related financial disclosures to contend with, organisations should prioritise staying ahead by identifying and actively managing climate-related financial risks and opportunities; establishing robust governance practices, to ensure strategies and risk management for identified risks and opportunities; and ensuring processes are in place to verify disclosures.

How we can help

We have advised a number of clients, across a wide range of sectors, on climate governance matters and climate-related disclosures.

This has included:

• reviewing and verifying risk and governance frameworks, including providing advice on uplifting them in preparation for anticipated changes to regulatory requirements and in light of increasing stakeholder expectations;
• conducting in-depth legal reviews of disclosures and public commitments and targets, including advising on misleading or deceptive conduct (greenwashing and bluewashing) risk, and verification of forward-looking representations;
• advising organisations on climate-related financial disclosures. This includes assisting clients with the preparation of annual and half-yearly reports (eg voluntary climate-related disclosures), as well as standalone climate and sustainability reports, having regard to statutory reporting requirements, directors' duties and ASX Corporate Governance Council Principles and Recommendations;
• assisting organisations to prepare for the commencement of mandatory climate-related financial disclosure requirements in Australia, including helping clients establish procedures to support boards to provide a directors' declaration regarding the new sustainability report and uplift of governance frameworks; and
• responses to shareholder and investor engagement on climate matters, including shareholder-led resolutions, 'Say on Climate' resolutions and AGM questions.

Being a multi-disciplinary team, we advise on compliance with reporting requirements under the Corporations Act 2001 (Cth), alignment with voluntary reporting frameworks such as the Task Force on Climate-Related Financial Disclosures and the International Sustainability Standards Board standards, and greenwashing risk associated with climate-related claims.

We have also worked with businesses to conduct gap analyses of climate governance and disclosure processes against domestic regulatory requirements, international voluntary frameworks, and other best practice indicia, to identify opportunities for improvement.

A nature positive economy

Threats to nature and biodiversity continue to increase exponentially. Many companies are already responding to rising stakeholder expectations by considering their role in contributing to the goals that the Kunming-Montreal Global Biodiversity Framework has set. The Federal Government is also moving at pace to implement domestic reforms that align with international developments, to transition to a nature positive economy. Organisations are also deepening their understanding of, and starting to make disclosures relating to, dependencies and impacts on nature in their value chains.

How we can help

We have helped clients with:

• domestic and international policy, regulatory and legislative developments relating to biodiversity and nature;
• pursuing and establishing nature-based carbon farming projects and carbon credit transactions, participating in planting / native vegetation offsetting projects, and trading in biodiversity units;
• developing nature and biodiversity policies, and adopting nature-related targets, commitments and strategies;
• financing transactions for natural capital enhancement projects and with natural capital fund formation;
• preparing nature-related disclosures (eg according to the Taskforce on Nature-related Financial Disclosures recommendations), including advising on greenwashing risk and the interaction of disclosures with existing reporting obligations; and
• directors' duties, and governance and risk management processes for nature-related risks.

We work with clients at various stages of your journey to embed biodiversity and natural capital considerations into your business strategy and processes. For example, we have advised:

• a renewable energy development company on its nature strategy and on opportunities to participate in Australia's emerging biodiversity markets (including as biodiversity credit developer);
• an agricultural company on the application of the European Union Deforestation Regulation to its business operations; and
• a number of listed entities regarding management and disclosure of nature-related risks, impacts and dependencies relevant to their business and supply chains.

Proven strategies to mitigate the risk

In the past 20 years, climate and sustainability litigation has expanded significantly, and in recent years, Australia has been one of the most active jurisdictions globally for climate-related litigation, in terms of volume. Proceedings can be in the form of asset-specific litigation, public law challenges, greenwashing litigation, actions under financial and corporate law regulation, tort law claims and human right complaints.

How we can help

We have assisted clients with:

• potential exposure to climate litigation risk regarding matters such as greenwashing, management and disclosure of climate-related risk, directors' duties, compliance with disclosure requirements under the Corporations Act and other statutory duties, and climate change-related project impacts;
• mitigating greenwashing risk associated with climate-related claims and commitments, including developing internal guidelines on interpretation and implementation of climate commitments, and guidance materials regarding external reporting on those commitments;
• potential implications of recent regulatory investigations and enforcement action relating to greenwashing, and climate-related proceedings brought by individual shareholders and strategic litigation groups; and
• climate-related litigation, including greenwashing claims, judicial review and alleged breaches of financial regulatory laws.

Complying with the tapestry of federal and state emissions regulatory laws

Few areas of Australian law have been subject to more volatility than those related to carbon emissions and abatement. At a federal level, the National Greenhouse and Energy Reporting (NGER) Scheme and the reformed Safeguard Mechanism govern emissions and energy consumption reporting and emissions abatement obligations. At the state level, some environmental regulators have commenced imposing conditions on site licences, requiring net emissions to be abated over time.

In this dynamic area of law, we help clients to anticipate, and shape your response to, new regulatory requirements.

How we can help

We have assisted clients with:

• understanding the application to your business of the Safeguard Mechanism regime and recent reforms, and options for managing Safeguard Mechanism compliance obligations;
• compliance with registration, reporting and record-keeping requirements under the NGER Scheme;
• interactions with the Clean Energy Regulator and other state/territory level regulators;
• preparing and reviewing submissions to public and industry consultations on the implementation of Safeguard Mechanism reforms;
• conducting due diligence on the impact of the Safeguard Mechanism on target companies, and negotiating detailed compliance cost allocation provisions in shareholders agreements; and
• considering the impact of compliance costs and capital expenditure to reduce emissions on joint ventures.

We have considerable experience advising clients from various sectors on compliance with requirements under the NGER Scheme and Safeguard Mechanism regime. Most recently, we have worked closely with organisations to help them navigate the implications of Safeguard Mechanism reforms, including advising on: the application of the reformed Safeguard Mechanism to 'existing' and 'new' facilities, changes to emissions baseline calculation methodologies and production variables, and the range of options for managing excess emissions under the amended scheme.

Securing opportunities to monetise abatement

As we move towards a carbon-constrained future, carbon offsetting projects present an opportunity for individuals and businesses to deliver on their carbon reduction commitments. They also present an opportunity to generate new income streams and green investments.

How we can help

We have assisted clients with:

• pursuing and establishing carbon abatement and sequestration project opportunities under the Australian Carbon Credit Unit (ACCU) Scheme (formerly the Emissions Reduction Fund), and international carbon crediting frameworks;
• generation or procurement of carbon offsets to comply with obligations under federal or state laws and policies, or conditions of project approvals, including advising on proposed ACCU purchase structuring and associated regulatory and transactional issues;
• undertaking M&A activity in the carbon abatement sector;
• preparing and reviewing carbon trading documentation (for both primary and secondary market transactions), as well as carbon project services and development agreements;
• understanding the regulatory, legal and transactional risks in connection with participating in the ACCU Scheme and negotiation of contractual risk allocation; and
• regulatory compliance matters in connection with participation in carbon markets, including Australian Financial Services Licence requirements and derivatives transaction reporting duties.

We have previous experience working with clients from various sectors to establish carbon farming projects on their sites and on third-party sites, through contractual arrangements with third-party project developers / service providers and landowners. Additionally, we have assisted clients seeking to purchase and sell offsets on the secondary market, including by preparing bespoke master trading agreements and confirmations for spot, option and forward transactions, having regard to market positions in Australian Financial Markets Association, International Swaps and Derivatives Association and/or International Emissions Trading Association documentation.

Deliver on carbon reduction targets at lower energy prices

As part of the energy transition, businesses are expected to deliver on their carbon reduction commitments, including purchasing electricity from renewable sources. We help clients to manage your exposure to changing electricity prices and to support carbon reduction initiatives – read more.

A climate change perspective

For many years, the impact of climate change has been a relevant consideration in the assessment of planning and environmental approval applications in Australia. The focus has primarily been on a project's direct emissions. However, in recent times, it has become increasingly common for consent authorities also to require an assessment of scope 3 emissions that has regard to all of a company's indirect emissions that occur in its value chain.

How we can help

We have assisted clients with:

• navigating federal and state project approval pathways, including engaging with regulators and consulting with stakeholders, to help de-risk the approvals process and maximise efficiencies;
• climate change-related conditions in project approvals (eg conditions attaching to state environmental approvals that require abatement / management of greenhouse gas emissions);
• appeals, including merits review and judicial review proceedings, of environment and planning approvals with a climate change interface; and
• generation or procurement of carbon offsets to comply with conditions of project approvals, including advising on procurement strategies, and negotiating contractual allocation of cost and risk.

We have extensive experience working with clients through all stages of the project development process, from advising on optimal project assessment and approval pathways, to strategies for compliance with climate-related conditions of environmental approvals. We also assist clients to document arrangements for the establishment of carbon abatement projects and/or purchase of offsets on the secondary market for compliance purposes.

Steps towards a close-looped system

As the world recognises the need to better protect energy and natural resources, improve biodiversity practices and get a handle on climate change, a global movement for transitioning to a circular economy has developed. This has led to stricter requirements for international markets and an increase in government regulation.

Businesses are under increasing pressure to understand their role in transitioning from a 'take, make, waste' economy, to a close-looped system that will benefit the planet.

How we can help

We have assisted clients to:

• establish product stewardship arrangements to enhance waste avoidance and materials recovery in various product areas;
• undertake strategic waste and recycling infrastructure planning for the purposes of enhancing regional recycling outcomes;
• procure recycling and food / organics collection and processing services;
• negotiate contractual arrangements requiring the responsible handling of waste at the end of the life of buildings and rolling stock;
• navigate approvals issues in connection with recycling and energy recovery projects; and
• document arrangements between participants, including financiers, in waste to energy projects.