Corporate energy transition: legal tools for shifting companies towards clean energy practices
This project examined the potential and limitations of three specific corporate law tools – disclosure obligations, directors’ duties and shareholder resolutions – to influence decision-making by listed companies, so as to improve climate risk management and allocate resources in ways which support clean energy transition. The focus of the report is on Australian law and practice. However, the report also includes an assessment of parallel developments in the United States, which is similarly placed to Australia in terms of its carbon-intensive economy and corporate/securities law requirements.
Exploring the potential for private sector actors to take the lead on clean energy transition is important in the context of strong partisan politics, ongoing policy uncertainty, and an absence of effective laws to tackle climate change mitigation and clean energy transition in Australia. In this regard, the project used a framework analysing internal pathways (company-driven) and external pathways (investor-driven) for corporate energy transition through divestment and reinvestment, and examined their relationship to the three corporate law tools.
The report sets out a number of recommendations that may enhance the role of corporate laws in transitioning to clean energy practices. These include:
- Improving the quality and quantity of corporate disclosure of climate-related business risks, including considering requirements for companies and investors to report and quantify their performance in relation to targets and goals for transitioning to clean energy practices.
- Assisting directors to develop their climate competence to promote the effective internalisation and management of climate risks and opportunities, and enhance consideration of the longer-term interests of other stakeholders in company decision-making.
- Reforms to the existing framework for shareholder resolutions in Australia and strengthening emerging trends in these resolutions in order to further facilitate energy transition goals.