This is a service specifically targeted at the needs of busy non-executive Directors.  We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

In this edition, we consider the International Organisation of Securities Commission’s new sustainability standards which aim to prevent greenwashing, the Full Federal Court’s decision to overturn an earlier decision imposing a duty of care to protect children against climate change, and continued criticisms of the proposed reforms to the litigation funding regime.  

In Over the Horizon, we reflect on M&A activity in 2021 and provide some further thoughts on the M&A market over the next 12 months.


Further plans to increase transparency to mitigate greenwashing.  Last week we saw the backing of transparent sustainability disclosure (and in turn, condemnation of greenwashing) from another global regulator, with the International Organisation of Securities Commission (IOSCO) announcing its plan to conduct a thorough review of the IFRS International Standards Board Exposure Drafts of proposed climate and general sustainability disclosure requirements (IFRS Sustainability Standards).  If the IOSCO finds the IFRS Sustainability Standards are fit for purpose, all 140 of the IOSCO member jurisdictions, including Australia, will consider how they may adopt or be informed by the standards.  IOSCO has also identified independent assurance of sustainability data as a key area of focus to enhance trust in Sustainability Standard reporting.  IOSCO’s key aim is to prevent greenwashing by “building trust through high standards of behaviour…so that investment products described as sustainable actually are”. The announcement of IOSCO’s plan follows the global regulator’s recommendations made in November 2021 to (amongst other things) facilitate transparent and independent ESG ratings. See IOSCO’s media release. Directors should note that as regulatory standards for sustainability-related disclosures remain fluid, added caution is required to ensure companies’ efforts to meet investor demands in the ESG realm do not stray into greenwashing.

ASX Market Announcements Office to close one hour earlier from the end of Daylight Saving Time.  As of Monday 4 April, the ASX Market Announcements Office will close at 7:30pm (as opposed to 8:30pm) AEST on each trading day, as the time difference between the East and West reduces by one hour.  There will be no change to the operating hours from a West Australian perspective.  See ASX Compliance Update.


Landmark climate change duty of care case overturned: no novel duty of care is owed to children by the Environment Minister.  The original proceeding was brought on behalf of 8 children representing a class of plaintiffs comprising all Australian children and concerned the Federal Environment Minister’s decision whether to approve Whitehaven Coal’s Vickery Extension Project in NSW.  If approved, the project would result in the emission of up to 100 Mt of carbon dioxide over its life.  At first instance in May 2021, the Federal Court found that the Minister owed a novel duty of care to Australian children to avoid causing them any personal injury when exercising their power under sections 130 and 133 of the Environmental Protection and Biodiversity Conservation Act 1999 (Cth).  However, the Full Federal Court has unanimously allowed the appeal and overturned the decision, finding that the duty of care should not be imposed.  Each judge’s reasons differed but shared a common view that it was not possible to establish the elements of causation and proximity required to make a case of duty of care in this instance.  The Full Federal Court’s decision represents an important check on the potential reach of climate change litigation in Australia.  The difficulty in establishing causation and proximity will likely arise in future actions brought against both public officials and corporations. See the decision.

Continued criticism to proposed reforms to the litigation funding regime.  Director representative groups have been actively lobbying for a tightening of litigation funding rules for some time.  In October 2021, the Federal Government responded through the introduction of the Corporations Amendment (Improving Outcomes for Litigation Funding Participants) Bill 2021 (Bill).  The Bill sought to address recommendations made by a Parliamentary Joint Committee on litigation funding and the regulation of class actions.  The Bill provides a statutory regime for mandatory court oversight of the distribution of class action proceeds between the litigation funder and members of the class, guided by a rebuttable presumption that the distribution of proceeds is not fair and reasonable if more than 30% is to be paid to entities who are not class action members (such as litigation funders and lawyers).  Additionally, the Bill seeks to impose a requirement on litigation funders to hold an Australian financial services licence, which rules out litigation funding by many foreign entities. The Bill has been hotly debated in Parliament with the result that its passage will likely be delayed beyond the upcoming Federal election.  The Bill has been criticised by Federal Court judge, Justice Bernard Murphy, warning against attempts to stymie the use of current funding practices.  The success of the Bill will likely be very much dependent on the outcome of the Federal election, with the Labor Opposition opposing the Bill in favour opting for more “modest” reforms. 


A reflection on 2021 M&A activity and outlook for the next 12 months.  While commentators originally predicted the pandemic would dampen deal-making, the massive fiscal and monetary response by policy makers instead created a boom.  2021 was a record year for M&A despite (or perhaps - at least to an extent - as a result of) COVID-19 disruptions, border closures, supply chain challenges and climate change concerns.  Gilbert + Tobin’s 2021 Takeovers and Schemes Review reports that 2021 saw 62 deals with a value over $50 million, and an aggregate deal value of $130.5 billion which quadrupled the 2020 numbers.  While we still expect 2022 to be a strong year for M&A activity, it is unlikely it will reach 2021’s record-breaking numbers.  Many of the ingredients which shaped 2021 activity, such as ultra-accommodative policy settings and a benign inflation outlook, are now a thing of the past, and this along with the air of uncertainty created by geopolitical tensions abroad and an upcoming federal election at home, will likely crimp deal activity.  On the other hand, this more challenging environment can expose targets for opportunistic transactions.  We also expect to see many demergers and divestments as public companies use the current market as an opportunity to restructure their portfolios, particularly in the energy and resources space, where the rush to divest “legacy” fossil fuel assets in favour of those with strong ESG credentials seems likely to continue, notwithstanding current strong prices for carbon-rich commodities. 

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