A class action filed over climate change risks related to Federal Government bonds highlights the rising threat of legal proceedings against directors and managers of private companies, lawyers say.

“The claim adds to the increasingly large body of principles and recommendations, regulations and lawsuits relating to climate change risks,” DLA Piper lawyers Natalie Caton and Sarah Griffiths say in an article.

“The claim also raises broader questions relating to corporate governance. Regardless of what sector a business operates in, directors and decision-makers must question more than the legality of their decisions and must align with their communities’ expectations.”

Student and investor Kathleen O’Donnell filed the action in the Federal Court of Australia against the Government, the Treasury Secretary and the Australian Office of Financial Management CEO alleging a breach of duties.

DLA Piper notes that both the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission have highlighted an increased focus on climate risks, and that judicial commentary on the sovereign bonds case will be important.

Directors’ and officers’ insurance premiums are continuing to soar as class actions target listed companies over disclosure breaches, raising concerns over trends that could further increase risks.

Fellow law firm Allens says in a note that Australia “is becoming front and centre as a forum for activist climate change litigation against corporates, financial institutions and government”.

“This case is a stepping stone towards more commercially focussed climate change disclosure class actions against corporations.”

Allens says the claim against the Government faces some significant hurdles and does not seek compensation, but the proceedings and others like it “should not be dismissed as insignificant”.