By: Amanda Beattie, Charu Stevenson and Zoe Jones

Overview

• In the first two articles in this series (here and here), we examined the rapid expansion of climate-related litigation globally and traced how those international developments are reshaping the Australian litigation landscape. Climate litigation is no longer confined to environmental approvals or public law challenges, but increasingly engages corporate governance, disclosure obligations and consumer protection frameworks.
• This third article in our climate change series turns to the practical consequences of that shift, focusing on the regulatory and risk implications arising from climate change-related conduct and disclosures.
• In particular, this article examines the growing regulatory and litigation risks associated with misleading and deceptive conduct, public statements and regulatory enforcement action, and the implications of those risks for corporates and financial institutions.
• We also examine ASIC’s mandatory reporting regime moving into 2026 and how this might translate to climate-related litigation in the future.

From climate risk to corporate accountability

As discussed in our second article, climate litigation has expanded into the realm of corporate disclosure and commercial risk. Climate risk is now recognised not merely as an environmental issue, but as a financial, operational and governance risk with potential implications for directors’ duties, continuous disclosure obligations and organisational risk management frameworks. These domestic developments reflect broader international trends. In its 2025 advisory opinion on climate change, the International Court of Justice confirmed that states have obligations under international law to prevent significant climate harm and regulate private actors. While not binding, the opinion underscores the growing expectation that climate-related representations by governments and corporations alike will be subject to legal scrutiny and accountability.

For boards and senior management, this shift is significant. Climate-related statements are increasingly indistinguishable from financial disclosures in terms of legal exposure. ESG commitments, transition strategies and sustainability narratives are now capable of grounding regulatory investigations and shareholder litigation.

The rise of misleading and deceptive conduct claims

As climate commitments and sustainability concerns become increasingly prominent in corporate disclosures, marketing materials and investor communications, they are being subjected to heightened scrutiny under established legal frameworks, including the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law. As such, misleading and deceptive conduct has emerged as one of the most significant sources of climate-related litigation and regulatory risk for corporations and financial institutions.

This reflects international trends, particularly in the US, where we have seen claims commenced against Clif Bars and Lululemon in relation to alleged deceptive marketing practices regarding the climate neutrality of their products. Whilst unsuccessful, Australian plaintiffs will see and learn from these and likely consider commencing similar actions in Australia.

ASIC

ASIC has identified greenwashing as a strategic priority and has taken action against entities alleged to have overstated their environmental credentials. ASIC’s guidance emphasises that environmental claims must be:

• accurate and capable of substantiation;
• use clear, well-defined terminology;
• be accompanied by an explanation of how sustainability factors are incorporated; and
• if making sustainability targets (eg. net zero), provide reasonable grounds, measurable metrics, timelines, and transparent processes so investors can assess progress and credibility.

Recent successful regulatory enforcement actions in Australia illustrate that greenwashing is a serious form of misleading conduct, rather than a peripheral compliance issue. ASIC has obtained penalties in three greenwashing cases so far:

• Active Super – $10.5 million penalty after the court found it had engaged in greenwashing by making false and misleading claims to members and potential members about its “green” or ESG credentials, in breach of financial services laws.
• Vanguard Investments – $12.9 million penalty for misleading representations regarding the ESG exclusionary screens applied to its investment funds.
• Mercer Super – $11.3 million for statements on its website about its ‘Sustainable Plus’ investment options, which claimed to exclude investments in companies involved in carbon-intensive fossil fuels like thermal coal, alcohol production, and gambling, and described the fund as suitable for members “deeply committed to sustainability.”

More recently, ASIC has commenced proceedings in the Supreme Court of New South Wales against the responsible entity of an ESG-focused investment fund, alleging governance failures and misleading conduct in relation to the fund’s investment screening processes and representations to investors.¹ These proceedings indicate a continued willingness by ASIC to test the adequacy of both disclosure and internal governance frameworks underpinning ESG products.²

ACCC

The Australian Competition and Consumer Commission (ACCC) has also taken an increasingly active role in regulating environmental and sustainability claims.

In 2023, the ACCC published its guidance, Environmental claims and the Australian Consumer Law, which sets out principles for businesses making environmental representations. The guidance reinforces that claims must be truthful, accurate, specific, and supported by reasonable evidence, and warns against vague or unqualified statements such as “green”, “sustainable” or “carbon neutral” without proper explanation.³

The ACCC has also taken enforcement action in this space. In proceedings commenced in June 2025 against Australian Gas Networks,⁴ the regulator alleges that the company engaged in misleading and deceptive conduct in its “Love Gas” marketing campaign by overstating the environmental benefits and availability of renewable gas to consumers. The ACCC alleges contraventions of Australian Consumer Law in the campaign, causing harm to consumers by “giving consumers the false impression that they will receive renewable gas through AGN’s gas networks within a generation”.⁵ This highlights the ACCC’s focus on consumer-facing representations, and increased scrutiny on advertising and public communications as well as financial market disclosures. The matter is currently at the case management stage before the Federal Court and remains on foot.

Other actions

Private enforcement is also beginning to test climate-related representations in Australian courts. A recent example is proceedings brought by the Australasian Centre for Corporate Responsibility against Santos Ltd in the Federal Court.

The applicant alleged that Santos had engaged in misleading and deceptive conduct in relation to statements in its 2020 Annual Report and subsequent climate disclosures, including representations about its “net zero” emissions pathway, the characterisation of natural gas as “clean energy”, and claims regarding “clean” or “zero-emissions” blue hydrogen. It was alleged that these statements lacked reasonable grounds and failed to disclose material assumptions and emissions impacts.

The proceedings were ultimately dismissed by the Federal Court. In her reasons published on 17 February 2026,⁶ Justice Markovic found that Santos’ representations were not misleading or deceptive when assessed in context and from the perspective of the relevant audience, which included a broad class of investors. In particular, the Court accepted that statements regarding net zero targets and transition strategies were forward-looking in nature and did not convey a guarantee of future performance.

The judgment emphasised that:

• whether a representation is misleading must be assessed holistically, having regard to the overall impression conveyed and the context in which the statements are made;
• the relevant audience (including investors) is likely to understand statements about net zero targets and transition pathways as expressions of opinion, expectation or future intention, rather than statements of present fact or guarantees; and
• establishing that forward-looking climate representations lack reasonable grounds requires cogent evidence, and plaintiffs bear a significant evidentiary burden in demonstrating that such statements are misleading.

The decision confirms that climate transition strategies are capable of judicial scrutiny, but also illustrates the evidentiary burden faced by plaintiffs in establishing that such statements lack reasonable grounds.

The Santos proceeding is regarded as one of the first cases globally to challenge a private company’s net-zero transition plan through the lens of traditional misleading conduct provisions under consumer laws. We note that Australasian Centre for Corporate Responsibility has commenced an appeal of the judgment.

In addition, the earlier proceedings involving EnergyAustralia (discussed in our previous article in this series) demonstrate the growing willingness of private litigants to challenge environmental and climate-related representations, particularly in consumer-facing contexts.

Mandatory reporting

The introduction of mandatory climate-related financial disclosures marks a structural shift in the regulatory landscape and heightens litigation and enforcement risk for corporates and financial institutions.

Much has been written about these obligations, but in short under amendments to the Corporations Act 2001 (Cth), entities that meet prescribed thresholds and must prepare a sustainability report containing climate-related financial information aligned with AASB S2. These requirements are being phased in across three cohorts, it commenced with the largest entities for financial years beginning on or after 1 January 2025, with broader application from 1 July 2026 and 1 July 2027. The sustainability report must disclose material climate-related risks and opportunities, governance and risk management processes, metrics and targets (including greenhouse gas emissions), and climate resilience assessed through scenario analysis.

While the regime is intended to improve transparency and investor decision-making, it also fundamentally changes the nature of climate disclosures. Statements that were previously voluntary or aspirational will now be subject to statutory reporting obligations, audit and regulatory oversight. In particular, directors have a duty to exercise their powers with the care and diligence, which includes (but is not limited to) having an understanding about the reporting entity’s sustainability reporting obligations, climate-related risks or opportunities that could reasonably be expected to affect the reporting entity’s prospects that a reasonable person would exercise in the circumstances, and making an independent assessment of the information or advice provided by experts and advisors on sustainability reporting.⁷

ASIC has signalled that commencing in 2026, it will undertake its first review of sustainability reports lodged in line with its approach to reviewing other financial reports lodged by reporting entities. In doing so, ASIC has the power to issue directions to reporting entities where it considers that a statement made in a sustainability report is incorrect, misleading or incomplete.⁸ ASIC has said it will take a pragmatic and proportionate approach to supervision and enforcement.⁹ The regime also has a three year “safe harbour” for forward-looking statements made in good faith, effectively protecting entities from liability for projections or targets during that period. However, once this period lapses, any statements that were inaccurate, incomplete, or misleading could form the basis of shareholder or consumer litigation.

Given the growing scrutiny of ESG claims and the increasing sophistication of investors in assessing climate-related financial risks, it is only a matter of time before inadequate or inconsistent reporting becomes a trigger for enforcement action or private proceedings. Whilst we are some time away from a shareholder class action based on inadequate or misleading climate reporting, it is only a matter of time until we start to see these sorts of actions unfold.

Implications for boards and organisations

The cases and regulatory developments discussed in this article and across the broader series make it clear that climate-related litigation is no longer a niche environmental issue. It is now a central regulatory and commercial risk that boards and senior management cannot afford to treat as optional.

Climate-related statements, ESG commitments and sustainability narratives are increasingly being treated like financial disclosures. They are subject to scrutiny not just for accuracy, but for completeness, consistency, and whether they give the market a fair overall impression. At the same time, enforcement risk is expanding on multiple fronts. Regulators are actively pursuing greenwashing through both financial services and consumer protection frameworks, while private litigants are showing an increased willingness to test climate-related representations in court. The decision in the Santos judgment demonstrates that such claims can be difficult, particularly where statements are framed as forward-looking or opinion-based. However, it also confirms that climate transition strategies and net zero commitments are properly subject to judicial scrutiny under established misleading conduct principles.

The introduction of mandatory climate-related financial disclosures further intensifies this risk landscape. Statements that were once voluntary or aspirational are now subject to statutory reporting obligations, regulatory oversight and, in time, potential audit scrutiny. When the “safe harbour” period expires and reporting practices mature, inconsistencies or deficiencies in climate disclosures are likely to become a focal point for both regulatory intervention and shareholder claims.

The next logical step is for investors to take action in this space. Shareholder litigation provides a clear blueprint for how climate-related disclosures may be challenged through traditional securities class action pathways. While there have been some losses for plaintiffs in recent shareholder class actions, those decisions still provide guidance for how to successfully prosecute shareholder class action claims and plaintiff firms will be on the lookout for statements by companies that could provide the basis for a claim by shareholders. Through the shareholder actions to date, it is clear that Australian courts have the doctrinal tools to assess climate-related claims through familiar legal questions, such as what was represented, what was omitted, whether forward-looking statements had reasonable grounds, and whether the overall impression was misleading.

The clear takeaway is that climate-related statements and ESG commitments are no longer optional marketing tools, and companies must embed robust governance, verification, and risk management into their reporting to avoid regulatory, legal, and reputational risks. Organisations that fail to embed these disciplines into their disclosure and risk management frameworks face increasing exposure to regulatory action, litigation risk, and reputational harm.

Key Contacts & Updates

Stay tuned for our future articles where we will take a deeper dive into Climate Litigation. If you have any questions or comments, please feel free to reach out to our authors.

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