Australian companies may be able to avoid legal scrutiny under a new greenwashing law.

The Albanese government has proposed legislation that could grant Australian companies a three-year exemption from private litigation over their climate plans. 

The plan is part of a bill aimed at increasing transparency on climate risks and mitigation strategies.

While the bill has been praised for promoting corporate accountability and enhancing climate-related disclosures, critics argue it may let companies accused of greenwashing avoid scrutiny and withhold critical information from investors.

The proposed laws would protect certain statements by companies, directors, and auditors from legal challenge for three years, except in cases of criminal behaviour or actions initiated by the Australian Securities and Investments Commission (ASIC).

Equity Generation Lawyers noted that these laws would likely have blocked past successful cases against Commonwealth Bank and National Australia Bank for funding fossil fuel projects. 

The bill could also have prevented a landmark lawsuit against Rest Super regarding climate risks in investment decisions.

The Australasian Centre for Corporate Responsibility (ACCR) warned that the legislation could lead to an “extended enforcement holiday”, reducing incentives for compliance with mandatory climate disclosures.

The Greens have proposed an amendment to shorten the immunity period to one year. Nick McKim, the party's spokesperson for economic justice and treasury, says he supports the mandatory disclosure legislation but criticised the three-year immunity as overly generous, urging the government to back the Greens' amendment.

The proposal aligns with the International Sustainability Standards Board's work. 

A spokesperson for Treasurer Jim Chalmers emphasised the government's commitment to responsible climate reporting, aiming to unlock investment in cleaner energy while protecting compliant businesses.

If approved, the new reporting requirements will take effect from 1 January.