Climate Risks in Legal Advice
The Law Society of NSW’s Climate Change – Practitioner Guidance and its annexure, Advising on Climate Risk (updated September 2025), make it clear: we must factor climate risks into our advice.
This includes physical risks like floods, bushfires, or rising sea levels and transition risks such as new regulations or market shifts toward net-zero. These are real issues that can impact your business, assets, or deals.
For instance, in property transactions, we’re scrutinising local government planning certificates for climate risks, like flood zones or bushfire-prone areas, which can drive up insurance costs or complicate mortgage approvals. Overlooking these could expose you to losses and us to negligence claims.
Here’s what we do for you:
- Assess how climate risks affect your operations, assets, or transactions.
- Guide you through new rules, like the Commonwealth’s mandatory climate reporting, effective January 2025 for businesses meeting two of these: 100+ employees, $25 million in assets, or $50 million in revenue.
- Help you tap into opportunities from Australia’s net-zero push, including the Sustainable Finance Roadmap and Future Made in Australia reforms.
Mandatory Climate Reporting: The new reality
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, effective January 2025, mandates climate-related financial disclosures (CRFD) aligned with International Sustainability Standards Board (ISSB) standards.
If you’re a qualifying business, you must report on climate risks, opportunities, and strategies, including Scope 1, 2, and 3 emissions, scenario analyses, and transition plans.
Until December 2027, you’re shielded from private lawsuits over certain disclosures (like Scope 3 emissions or transition plans), but the Australian Securities and Investments Commission (ASIC) is vigilant about accuracy.
Missteps can be costly – just look at the Australian Competition and Consumer Commission’s ongoing 2025 case against Clorox Australia for misleading “green” claims. Get it wrong, and you risk fines or reputational damage.
To stay compliant:
- Build robust systems to track and verify climate data.
- Work with us to ensure disclosures are accurate and avoid “greenwashing” risks.
- Understand how your reports might influence investors or trigger ESG-linked contract terms.
Climate Risks in Contracts
Climate is now a critical factor in contract drafting. The NSW Court of Appeal’s 2025 decision in Denman Aberdeen Muswellbrook Scone Healthy Environment Group Inc v MACH Energy Australia Pty Ltd [2025] NSWCA 163 ruled that consent authorities must consider Scope 3 (downstream) emissions under section 4.15(1)(b) of the Environmental Planning and Assessment Act 1979 (NSW) when assessing development applications. This is a big deal for construction, infrastructure, and energy projects.
We can help you:
- Add “Force Majeure Clauses” provisions to cover extreme weather or regulatory shifts.
- Adopt circular economy principles, as urged by the Law Society, especially in sustainable precincts.
- Ensure contracts align with the Product Lifecycle Responsibility Act 2025 (NSW), which promotes waste reduction and product stewardship (e.g. for batteries or e-waste).
Disputes and Litigation: The stakes are rising
Climate-related lawsuits are on the rise, especially in the NSW Land and Environment Court.
- In 2021, Bushfire Survivors for Climate Action Inc v Environment Protection Authority [2021] NSWLEC 92 forced the EPA to strengthen its climate policies.
- In 2023, Munkara v Santos NA Barossa Pty Ltd [2023] FCA 1421 saw traditional owners challenge a gas project over weak climate and cultural risk assessments.
- In 2025, Federal Court case Pabai and Kabai v Commonwealth [2022] FCA 836 tested whether the government owes a duty of care to protect Torres Strait Islanders from climate harm, spotlighting climate and human rights.
Key risks to watch:
- Growing challenges from stakeholders, like traditional owners or advocacy groups, over inadequate climate assessments.
- ASIC’s crackdown on greenwashing—don’t exaggerate your environmental claims.
- The need for bulletproof environmental impact statements, especially after the Denman ruling on Scope 3 emissions.
Key Steps for Your Business
We recommend you:
- Engage expert legal advice: seek advice to integrate climate risks into your strategy, compliance, and risk management.
- Prepare for new rules: be ready for the CRFD regime and laws like the New Vehicle Efficiency Standard (effective mid-2025), which impacts transport businesses.
- Reduce litigation risks: review contracts and disclosures to avoid disputes, especially in high-emission sectors like resource recovery, energy or construction.
- Stay Informed: stay across latest legal updates and, where necessary, ask us for tailored legal advice on navigating these changes.
