Great Barrier Reef report

Great Barrier Reef Queensland, Australia

Threats, challenges, and opportunities for the sustainable future of Australia’s greatest environmental asset



JACINTA STUDDERT Partner, Clyde & Co

The Great Barrier Reef (the Reef), which is located in the Coral Sea, off the coast of Queensland, is an iconic landmark of Australia’s culture and environment. As a marine environment relied upon by thousands of people for employment, thousands more for recreation and cultural enjoyment, and a hotspot for many industries, it is uniquely incumbent on government and industry to consider how this piece of World Heritage can be resilient in the long term.

This report discusses the cumulative stressors on the Reef, including climate change, pollution, poor land management and management of industry in and around the Reef. It examines some of the strategies being implemented to increase the long term resilience of the Reef, and the risks to government and industry operating in this area.




The Great Barrier Reef is a beloved part of Australian and World Heritage, with its history in providing recreation, culture, and food extending for as long as the first human occupation by Aboriginal people in the region over 40,000 years ago. The Reef forms part of the natural capital of Australia, generating social, economic, and environmental value to Australians and the world. Deloitte Access Economics has valued the economic, social, and icon asset value of the Reef at AUD 56 billion, contributing AUD 6.4 billion and over 64,000 jobs to the Australian economy in 2015-2016. 1 However, the Reef is at risk. It faces many localised risks – such as fishing and shipping – as well as regional and climate challenges – such as climate change and the resulting sea level rise, ocean acidification, and ocean pollution. The recent Great Barrier Reef Outlook Report 2019 2 prepared by the Great Barrier Reef Marine Park Authority ( GBRMPA ) has painted a dire picture for the outlook of the Reef as “very poor”, noting that while small scale, local initiatives have been successful, the overall health of the Reef is increasingly challenged by cumulative pressures that are causing the continued deterioration. As an important habitat and World Heritage site, ensuring the long term resilience of the Reef is on the radar of State and Commonwealth governments. This provides a local, national, and international impetus for policy to be

developed around tackling the many challenges faced by the Reef. Such policies may require adaptation or transition by businesses operating in and around the Reef, from changing their practices, to potentially having to transition away from riskier activities. Nonetheless, there are opportunities to be found in building resilient infrastructure and finding ways to sustainably conduct Reef dependant industries such as fishing and tourism, which impacts both humans and the natural environment of the Reef itself. provides opportunities to reimagine management of the Reef to provide a ‘blue economy’. 3 Management of a blue economy requires holistic consideration of energy, tourism, and climate change, carbon sequestration in marine habitats, fisheries, waste management, and marine transport in marine/coastal environments. 4 A blue economy approach views stewardship over the Reef as key to ensuring long term, sustainable opportunities to provide food security, employment, carbon sequestration,andcoastal resilience,aswell as providing employment and participation opportunities for social groups and Reef- dependent economic sectors. CREATING A BLUE ECONOMY Solving these challenges





Climate change impacts on the Reef

Industry opinion: Spotlight on the Resilient Reefs initiative




Physical risks of climate change on industries around the Reef

Resilience strategies, opportunities and transition risks

Litigation risks for business and government




Key contacts

1 great-barrier-reef-230617.pdf 2 3 4


Climate change impacts on the Reef


The cumulative impacts of climate change and other stressors on the Reef - such as unsustainable local development, ocean pollution, and shipping - are considered likely to challenge the resilience of the Reef into the future. Climate change is the biggest threat to coral reefs globally, with the Intergovernmental Panel on Climate Change predicting that coral reefs would decline by 70-90% with global warming of 1.5 degrees. 5 The GBRMPA has called for urgent action to reduce greenhouse gas emissions, acknowledging climate change as being the greatest threat to the Reef and coral reefs worldwide, stating that if the current rate of greenhouse gas emissions continues, this will continue to cause the health of the Reef to decline, and that strong global action to curb climate change is needed urgently to give the Reef the best chance of survival. 6

Average sea surface temperatures on the Great Barrier Reef have warmed by about 0.6 degrees since the 1950s. 7 When water is too warm, corals expel algae causing them to become smaller and turn completely white, known as “coral bleaching”. Rising temperatures has triggered five major coral bleaching events on the Reef - in 1998, 2002, 2006, 2016 and most recently 2017, with 2016 leading to record levels of coral bleaching. Loss of corals further reduces the abundance of marine species and other Reef-associated organisms, including marine plants, mammals and birds. 8


6 7 8

Climate change impacts on the Reef





Observed rises in sea levels since 1990 are tracking at a rate of 1 to 2 mm per year. Higher sea levels compound the impacts of storm surges, posing physical risks for dwellings, infrastructure and industries located in and around the Reef 13 . Since a significant proportion of land adjacent to the Reef is low-lying, changes to sea levels will result in greater erosion and land inundation. 14 This can contribute to issues such as flooding, storm damage, and infrastructure failure. This will also impact on juvenile fish that utilise low lying habitats for protection and food resources, 15 and the breeding and foraging activities of many species. 16 Rising sea levels at turtle and seabird nesting beaches would worsen beach erosion and flood nests. 17 Since sea levels are predicted to increase at a higher rate, there is concern as to whether coral reef growth will be able keep pace. There are also potential impacts to the shape and existence of coastlines, cays and islands. 18

The oceans have absorbed nearly one- third of carbon dioxide released into the atmosphere by human activities over the past 200 years. This has increased the acidity of oceans, with potential for serious consequence for Reef life and related industries. For example, increased acidity: – Reduces the capacity of corals to build skeletons, leading to a negative impact on their capacity to create protective habitat for the Reef’s marine life 9 , and leading to slower growth rates and weakened coral structures 10 – Impedes fish reproduction (since fish eggs are more sensitive to pH changes than fish adults) and the ability of fish larvae to locate suitable habitat 11

There are a number of other current and future stressors that threaten the long term health of the Reef. An environment already under pressure is less resilient to the impacts of climate change, and more susceptible to bleaching and disease. This includes: 23 – Growing development and population along the coast of Queensland, impacting on the filtering effect of flood plains, freshwater wetlands, and riparian 24 zones, in how floodwaters flow and are filtered into the Reef. An increased amount of sediment flowing into the Reef is causing damage to sea grasses and corals, and increasing growth of invasive species like crown- of-thorns starfish. This enhances the growth and survival of starfish larvae, and results in damaged nearshore sea grass beds and coastal coral assemblages. 25 Such negative impacts on seagrass health lead to flow on effects to the health of those animals that rely on good quality habitat such as turtles 26 – Growth of mining, and consequential expansion of ports and shipping in proximity to the Reef. This has included an increased need for dredging, and dumping of dredged spoil within the GBR World Heritage Area

Changes in ocean circulation are likely to change and strengthen some ocean currents, including the East Australian Current. This will change the connectivity and productivity of ocean environments, including shifting the geographical limits of some tropical species. 19 Alterations to ocean currents can potentially affect entire marine food webs because it can affect the transport of eggs and larvae within the Reef. 20 Further, microscopic plants (phytoplankton) rely on nutrients brought up from deeper in the ocean, however the process of nutrients reaching the surface is impeded by warming surface water; a result of currents transporting greater volumes of warmer water to the Reef. 21 This has flow on affects to the food supply of larger animals. This may lead to different species of marine life establishing themselves in different areas, 22 altering the biodiversity of the region.


Intense droughts followed by periods of high intensity rainfall events can cause contaminated freshwater plumes, with polluted run-off from rivers entering the Reef. More severe tropical cyclones may cause physical damage to reefs, for example after Cyclone Yasi in 2011, over 89,000 square kilometres of broken corals were reported. 12

9; threats-to-the-reef/climate-change/ocean-acidification 10 11 12 13 14-18

19 20-22 23 24 A riparian zone refers to land alongside creeks, streams, gullies, rivers and wetlands. 25 26 report-feb12.pdf

Climate change impacts on the Reef


In 2010 a Chinese bulk coal carrier MV Shen Neng 1 ran aground on the Douglas Shoal reef, 95 kilometers east of Yeppoon. While an estimated 4 tonnes of fuel oil was lost into the marine environment, the greater losses were as a result of the physical damage done to the reef, with a claim subsequently having been made against the vessel and its owners for physical damage to between 80,000m² and 400,000m². While the losses said to be associated with the restoration were potentially in the hundreds of millions, the claimwaseventuallysettledoncommercial terms that took into consideration the vessel owner’s legitimate ability to limit its liability under the Limitation of Liability Convention for a small fraction of the amount claimed. 30

Great Barrier Reef catchments

– Expansion of shipping in and around the Reef , and associated risks with accidental groundings, re-suspension of sediments in coastal waters, anchor damage and pollution from ships – Rogue commercial fishing in the Reef by foreign unregistered fishermen – Land Management of agriculture and catchment areas has been slow to implement best practice management systems necessary to prevent environmental impacts on the Reef. The Reef Water Quality Report Card 2017 and 2018 27 reported poor performance at improving land management in the agricultural industry, catchment management targets, water quality These concerns have recently been the subject of public discussion and protests leading up to the 2019 Federal Election, with protestors in the “Stop Adani” campaign opposing the controversial Adani Carmichael Coal mine proposed for the Galilee Basin, due to its potential contribution to global carbon emissions, expansion of a Point Abbot Port 28 for shipping coal, and other environmental impacts relating to pollution and groundwater. The project has also been under regulatory scrutiny, with allegations of illegal works and water pollution into wetlands. 29 home?report=target This Port geographically within the area of GBR Marine Park, however is excised from the Marine Park and its environmental zoning. water-wetland-breach/ ; and https://www. illegal-work-at-mine-group-claims-footage- shows/11180620 28 29 targets, and moderate to poor conditions for inshore marine conditions and freshwater wetland conditions in the catchment area 27

Cape York region


Wet Tropics region


Burdekin region


Mackay Whitsunday region


Fitzroy region


Burnett Mary region


42,400,000 hectares Total area 887 mm Average annual rainfall 73,789 GL Annual discharge to coast 6 Number of NRM regions


Reported by some to have been settled for in the order of AUD35 million: https://www. grounding-douglas-shoal-remediation-project- begins/10830958?section=environment

Source –

Climate change impacts on the Reef



2025 Catchment targerts Land management targets


Inshore marine condition

Sugarcane 9.8% adoption to date

Grazing 35.8% adoption to date

Grains 38% adoption to date

Very good Good Moderate Poor Very poor No change Improvement Decline

Horticulture 28.6% adoption to date

Bananas 64.7% adoption to date

Catchment management targets

Freshwater wetland condition

Ground cover 63% area with target cover

Riparian extent 0.74% loss

Wetland extent < 0.1% loss

Water quality targets

Dissolved inorganic N 0.3% reduction, 2017-2018

Sediment 0.5% reduction, 2017-2018

Particulate N 0.5% reduction, 2017-2018

Particulate P 0.6% reduction, 2017-2018

Pesticides baseline 97% of aquatic species protected

Source –


Industry opinion: Spotlight on the Resilient Reefs initiative



ADAM DAVIS Technical Director – Sustainability & Resilience, AECOM Australia Pty Ltd

Coral reefs are critically important ecosystems, supporting 25% of all marine life and the livelihoods and wellbeing of almost one billion people across 101 countries. ​But, right now, around 75% of the planet’s coral reefs under threat from local stresses and climate change. Business-as-usual approaches to coral reef management are no longer enough. The impact of climate change means that we are running out of time and the scale and urgency of the challenges need new approaches, now. Healthy reef ecosystems depend on people, and people depend on healthy reef ecosystems. Resilient Reefs is bringing together local communities, reef managers, and resilience experts to develop new solutions for combatting the effects of climate change. The Resilient Reefs framework promotes balancing the environment, local community, traditional owners, and local industries, engaging and allowing “buy in” from each of those stakeholders. This is a bold, new approach. We are putting people at the center and learning from the global resilience practice to innovate, build capacity and drive a whole- of-community approach to the challenges facing our treasured reefs. CONNECTING PEOPLE AND THE REEF

Over four years, from2018 to 2022, Resilient Reefs is piloting this work with five diverse and magnificent World Heritage- listed coral reef sites – Great Barrier Reef, Australia; Ningaloo Coast, Australia; Lagoons of New Caledonia; Belize Barrier Reef Reserve System; and Rock Islands Southern Lagoon, Palau. As these sites identify innovative solutions to their local challenges, we will help share and scale these lessons to reef communities around the world.  Through this initiative, we have enabled new ways of thinking about reef management. Many reef managers have been focused on delivering small, practical conservation projects. However greater focus on community and government level interventions can providemore far-reaching benefits. Through a knowledge network of reef managers in the five piloted Reefs, there has been sharing of knowledge and ideas for responding to similar challenges. It has also emerged that greater flexibility in governance and legislation in Queensland may better enable resilience to respond to changing conditions. For example; – Flexibility following storm events to temporarily shift the location or activities of tourism or fishing operations from a stressed or recovering part of a reef to other areas; and – Flexibility for community conservation THINKING DIFFERENTLY ABOUT MANAGING REEFS

Adam has completed climate adaptation and resilience projects at local, regional, state, national and international scales, looking at climate hazards, risk, vulnerability and resilience. Adam is AECOM’s project director on Resilient Reefs, which has been developed to build the resilience of UNESCO World Heritage listed coral reefs such as the Great Barrier Reef to the globally significant threat of climate change, whilst also building the reef communities’ ability to adapt to a future of uncertainty. In an urban context, Adam is also working with the Rockefeller Foundation as part of their 100 Resilient Cities initiative to assist their member cities across the Asia- Pacific address the shocks and stresses of the 21st century driven by climate change, globalisation and urbanisation.

The Resilient Reefs Initiative is a collaboration between Great Barrier Reef Foundation, BHP Foundation, UNESCO World Heritage Marine Programme, The Nature Conservancy, 100 Resilient Cities and AECOM (as delivery partner). These global partners each bring unique expertise and support to the pilot sites, as well as help to share the lessons and learnings from the initiative with reef communities around the world. The Resilient Reefs framework informs the Resilient Reefs initiative. 31

activities to be carried out, which current planning rules do not allow



Physical risks of climate change on industries around the Reef


In another survey 35 , it revealed that if the Reef continues to experience severe bleaching, a significant proportion of visitors were more likely to visit countries other than Australia. Further, tourism adjacent to the Reef could see the number of visitors being reduced from AUD 2.8 million (2015 figures) to around AUD 1.7 million per year. This is the equivalent of more than AUD 1 billion in lost tourism expenditure, threatening around 10,000 tourism jobs in regional Queensland. 36

The Reef attracts more than 2.2 million international and 1.7 million domestic visitors per year, and is also used by a large proportion of the 1 million people living in the region. Out of the estimated AUD 6.4 billion contribution of the Reef to the economy, AUD 5.7 billion comes from the tourism industry. 32 Damage to the Reef from bleaching could affect tourist numbers into the future. Recent surveys confirm the potential for tourism losses as a result of bleaching damage; in one survey conducted in 2016, 69% of tourists indicated they wanted to visit the Reef “before it was gone” 33 – an example of the ‘last chance tourism’ phenomenon. 34

32 33; uploads/964cb874391d33dfd85ec959aa4141ff.pdf 34 35 FINAL%20w%20cover.pdf 36

Physical risks of climate change on industries around the Reef




Commercial fishing and aquaculture are important industries, with the total value of revenue from all commercial fishing in the Reef being around AUD 199 million in 2015-16. The total value of commercial fishing and aquaculture associated with the Reef in 2015-16 is estimated to contribute around AUD 162 million to the Australian economy. 37 Damage to the Reef from loss of biodiversity and numbers of fish stocks and other marine wildlife would impact on the future of this industry.

Recreational activities in the reef catchment can be classified into fishing, boating, sailing, and visiting an island. Activities are only classified as “recreation” when they are undertaken by locals. 38 The total value of recreational activity associated with the Reef in 2015-16 was estimated to contribute around AUD 346 million to the Australian economy. 39

37 reef-230617.pdf 38 contribution.pdf 39 reef-230617.pdf


Resilience strategies, opportunities and transition risks

Being a significant cultural, environmental and economic institution, the Reef has been the focus of government investment and policymaking, with regulators identifying that policies to support the resilience of this ecosystem are important and necessary. 6.1 INTEGRATED AND EVIDENCE BASED POLICY APPROACH FROM GOVERNMENT Resilience and adaptation strategies require input and direction from government, to establish clear and consistent policies for the long term funding and management of the Reef, and Reef-dependent industries. This includes strengthening the long term funding and tenure of existing government institutions, such as the GBRMPA. The GBRMPA is already proactive in establishing the “Reef Blueprint for Resilience” 40 , which provides a blueprint for ensuring the resilience of the Reef, including identifying a resilience network, on the ground actions required to enhance resilience, and empowering communities and other partnerships to be part of the solution. 41

The has implemented strategies directed at achieving this. For example, it set up the Great Barrier Reef Water Science Taskforce in 2015 to provide advice on how to achieve water quality targets. 42 The Australian Government “Reef 2050 Plan” likewise establishes a framework for monitoring and management of the Reef from cumulative impacts, and longer- term threats such as climate change. 43 This includes detailed plans for managing issues including sustainability 44 , and improving water quality. 45 This plan includes annual reports on performance. 46 As the recent Great Barrier Reef Outlook Report 2019 47 noted, [the] challenge to restore Reef resilience is big, but not insurmountable… it requires mitigation of climate change and effective implementation of the [Reef 2050 Plan]. Queensland Government

40 41 42 43 44 45 46 annual-report-2018.pdf 47

Resilience strategies, opportunities and transition risks


6.2 ADAPTATION AND TRANSITION OF INDUSTRY IN AND AROUND THE REEF Part of ensuring the long term resilience of the Reef may mean some existing industries and development in and around the Reef will need to change their practices, or transition into new businesses. Where resilience strategies impact on the long- term commercial viability of industries and development in and around the Reef, policy approaches will need to consider the interests of those industries, and ensure there is a managed transition. Clarity, transparency and certainty in policy and legislative developments, as well as local engagement will be key.” Strategies implemented include: – Buy-backs of strategic businesses. For example, in 2016 the Queensland government purchased at a cost of AUD 7 million for rehabilitation a 56,000 hectare agricultural property responsible for close to half the sediment runoff to the northern Reef 48 – Grants to carry out works for improving the environmental performance of businesses and industries. For example, funding was granted for works to reduce gully erosion on two Stations in the Normanby region, which had created issues with sediment flows into the Normanby River and northern

6.3 MANAGEMENT OF DEVELOPMENT AND ACTIVITIES IN AND AROUND THE REEF Better planning for resilient development, including anticipating risks such as storm surge and sea level rise, will continue to be a challenge into the future. Efforts in comparable places such as Florida to build regional climate action plans could provide a potential model for action. 54 Examples of resilience projects in Florida include pocket parks to build nature-based flood protection and storm-water management, street elevation works, and redesigning public access to the waterfront. 55 A number of existing regulators and government agencies are responsible for the Reef and its surrounds, including the GBRMPA, Department of Environment and Energy (Commonwealth), Department of Environment and Science (Qld), Australian Maritime Safety Authority, and local Councils along the east coast of Queensland.


Reef. Works were completed on two stations to reduce sediment flow, and rehabilitate native planting, as well as planning for ongoing monitoring. 49 This project created opportunities for local Aboriginal people to gain employment in the works, as well as to then manage the Normanby Station as a going concern 50 – Banning certain activities within the GBR Marine Park World Heritage Area to reduce risk of damage. For example, in August 2018 the Queensland Government restricted transhipping operations to areas that are declared ports and prohibited transhipping outside these areas 51 – Public awareness campaigns for the community and local industry. For example, in 1999, twelve Local Marine Advisory Committees were established along the Reef, and roll our information campaigns and local policies dealing with awareness around marine pollution and fishing 52 Not all adaptation or transition strategies are led by government. For example, in May 2018, in order to preserve habitat for dugongs, WWF Australia purchased and retired the last commercial fishing licence in the Princess Charlotte Bay region north of Cairns, which permitted fishing with nets in that part of the GBR Marine Park. 53

Development and activities in the GBR Marine Park, or which might significantly impact on the GBR Marine Park, is subject to regulation under the Great Barrier Reef Marine Park Act 1975 and Environment Protection and Biodiversity Conservation Act 1999. Within the GBR Marine Park, detailed zoning maps apply which specify uses which are prohibited, allowed without a permit, and allowed with a permit. Given this, businesses operating within and near the Reef, including those which have run off into a waterway which feeds into the Reef, should ensure they confirm whether approvals are required for their activities, and manage pollution and other impacts from their activities on the Reef in accordance with any permits or approvals required. Management should be proactive in ensuring that the potential for pollution incidents or other environmental damage is minimised. Penalties of up to AUD 441,000 for a corporation and AUD 88,000 or 7 years imprisonment for an individual apply for carrying out an activity which causes a significant impact on the Reef. Likewise, penalties of up to AUD 2,100,000 for a corporation and AUD 420,000 or up to 3 years imprisonment for an individual apply to a person in charge of a vessel which causes damage, or is likely to cause damage, in the marine park.

48 49 annual-report-2018.pdf 50 normanby-station 51 annual-report-2018.pdf 52 annual-report-2018.pdf 53

54 ; resilience-accelerator-getting-up-to-speed-southeast-florida/ 55

Resilience strategies, opportunities and transition risks



6.7 PARAMETRIC INSURANCE AND DEDICATED TRUSTS AS A RISK MANAGEMENT TOOL One option for managing risk of physical harm to the Reef, and consequential economic and other losses, is establishing a dedicated management trust fund and obtaining parametric insurance cover. The use of dedicated funds to manage risk has precedent in Australia and a number of other jurisdictions, particularly in the context of terrorism risks. Australia put in place an insurance fund arrangement following the terrorist events of September 11, 2001, and the Australian Reinsurance Pool Corporation would provide insurance cover from the pool in the event of a declared terrorist event. The use of parametric insurance products is also becoming more widespread. These insurance products provide cover where a specific event occurs and differ from traditional types of insurance policies as

feasibility study. Projects included harvesting of coral spawn slicks (floating bundles of coral egg and sperm), and establishing coral settlement structures to withstand heavy seas and cyclones. 57 Other opportunities are likely to emerge in the area of ‘blue carbon’, as carbon is stored in three coastal ecosystems: mangroves, tidal marshes, and seagrasses. Protecting and restoring coastal blue carbon ecosystems offers opportunities for carbon sequestration and abatement. The Australian Emissions Reduction Fund (ERF) provides incentives for Australian businesses, farmers, land holders and others to adopt new practices and technologies to reduce Australia’s greenhouse gas emissions, and receive Australian carbon credit units for each tonne of carbon reduction. The Department of the Environment and Energy is exploring opportunities for blue carbon under the ERF, including contracting the Commonwealth Scientific and Industrial Research Organisation (CSIRO) to undertake a Technical review in 2017 of potential carbon abatement opportunities and barriers for blue carbon under the ERF. 58 However, further progress on this initiative appears to have stalled.

they involve advance agreement between the insurer and insured that a specific payment will bemade upon the occurrence of a specific event.When the insured event takes place, this triggers a fixed amount to be paid to the insured. The amount payable can be based on a modelled forecast of the loss that the policyholder will incur. There is no need for the insured to make a specific claim or for the insurer to investigate the precise extent or cause of damage. Triggering events can be anything, but are often set by reference to a measure of a catastrophic natural event, such as hurricane cover triggered by wind speeds exceeding a certain pre-agreed intensity. Parametric insurance can therefore provide greater certainty of coverage and payments for weather related risks can be made more quickly. This can be crucial for governments and communities responding to natural disasters or environmental issues that may occur.

To some degree, managing activities in the Reef itself cannot stand alone to global responses to issues such as marine pollution and litter, as the ocean currents have potential to bring marine plastics and other waste from outside the Marine Park and across the globe into the Reef. As such, the resilience of the Reef is also dependent on national and international measures to reduce the generation and improper disposal of waste and pollution reduction. 56 Investment in scientific research to build the resilience of the Reef has produced opportunities for innovators and landowners to participate in regenerative projects. For example, in 2018 the Australian and Queensland governments launched the Coral Abundance Innovation Challenge to call for tenders for projects to enhance coral abundance. Six innovators were invited to undertake an eight-month 6.6 OPPORTUNITIES FOR REGENERATIVE PROJECTS

56 57 annual-report-2018.pdf 58

Resilience strategies, opportunities and transition risks


The use of parametric insurance is one of several finance mechanisms to help manage the degradation of coral reefs.


As the Nature Conservatory has noted; 60 “The benefits and beneficiaries of this innovative climate risk insurance mechanism are manifold. The local community benefits because reef preservation enables the hotel industry wand ecotourism to thrive, and with it the services, income and jobs on which they depend. Hotel owners benefit because there is less beach erosion, and reduced risk to income and assets, thereby protecting a AUD 9 billion tourism industry. Government benefits because increased coastal resilience means fewer costs from infrastructure loss, and more resilient coastal industries. Conservation benefits because sustained financing mechanisms for maintenance and restoration result in a valuable natural system being preserved. And the insurance industry — now finally recognized as a critical tool for sustainable development — can benefit through the creation of a new market while also growing resilience.”

The newly launched Ocean Risk and Resilience Action Alliance is a multi-sector collaboration that looks to incentivize greater private investments and blended finance into coastal natural capital by pioneering ground-breaking products that both address ocean risk and build resilience. Private financing and blended finance tools, including through the expansion of insurance coverage, are currently underleveraged. Private capital is available if resilience investments can generate acceptable risk adjusted returns. The Alliance will therefore seek to unlock greater private and blended finance investment in coastal resilience, by working in three priority areas: 1. Practice & innovation Building risk-adjusted, innovative and scalable products that change the risk perceptions of investing in coastal natural capital and increase resilience while delivering a return on investment. 2. Research & knowledge Accelerating research and using data to better understand, analyse, predict, model and manage ocean risk. 3. Policy & influence Informing and advancing ocean resilience policy, governance, private sector and public understanding.

A solution using a trust fund arrangement and a parametric insurance product was adopted by the state government of Quintana Roo in Mexico for a portion of the Mesoamerican Reef along Mexico’s Yucatan Peninsula. 59 A dedicated management trust will be funded by municipal governments and the tourism industry, to fund maintenance projects to protect the reef before and after storm surges. “Coral reef insurance” will also be taken out, with the policy triggered by major hurricanes, providing funding to rebuild and regenerate the reef. The insurance premiums will be collected as a portion of tourism taxes and other government resources. The product was designed by global reinsurer Swiss Re, whose Chairman Martyn Parker has noted; “By combining private capital with public resources in a trust to fund premiums, we can help governments in vulnerable regions plan ahead more consciously to protect important natural assets, crucial to both the planet and the economy, like the coral reefs. In helping to speed up the recovery after a natural disaster, this type of innovative insurance will also help reduce the hit to the local and national economies overall.”

Chip Cunliffe, Co-Chair – Ocean Risk and Resilience Action Alliance Secretariat

59 60 capital


Litigation risks for business and government

Government and businesses operating in and around the Reef can be the target of public interest litigation to curtail particular activities. There is a long history of public interest litigation concerning the Reef, given the number of relevant stakeholders and regulators, and high community expectations for protection of the Reef. As such, there are strong litigation risks for proponents of development or activities within the GBR Marine Park, or which are within the catchment area for the Reef. For example: – Proceedings brought by NGO North Queensland Conservation Council Inc ( NQCC ) in 2015 concerning a decision made by the GBRMPA to approve dumping of three million cubic tonnes of dredged material into the Marine Park, associated with dredging works carried out to expand Abbot Point Port. As a consequence of these proceedings being brought and public pressure, the Australian Government amended the legislation to prohibit dumping, and the Administrative Appeals Tribunal cancelled the permit by consent 61

– Proceedings brought by NQCC in the 1990s to challenge a government decision to develop a harbour on Magnetic Island 62 – Successful proceedings brought by Queensland Conservation Council Inc against the Minister for Environment and Heritage relating to a decision not to undertake further environmental assessment relating to a proposal to construct a dam on the Dawson River, including due to its potential for impacts and pollution upon the Reef 63 – Proceedings brought by the Whitsunday Residents against Dumping Ltd in 2016 unsuccessfully challenging a licensing decision made by the Queensland Government to allow bulk material handling and sewage treatment associated with expansion of the Abbot Point Port for the Adani Carmichael coal mine 64


62 Nth Qld Conservation Council Inc v Executive Director, Qld Parks &Wildlife Service [2000] QSC 172 63 Queensland Conservation Council Inc v Minister for the Environment and Heritage [2003] FCA 1463 64 Whitsunday Residents Against Dumping Ltd v Chief Executive, Department of Environment and Heritage Protection [2017] QSC 121

Litigation risks for business and government


– Successful proceedings brought in 2018 by the Environment Council of Central Queensland against the Federal Minister for the Environment, relating to the level of environmental assessment to be undertaken for a proposal to clear 2,100 ha of native vegetation on Kingvale Station in the Great Barrier Reef catchment area 65 – Successful Administrative Appeals Tribunal (AAT) proceedings brought by Humane Society International in April 2019 against the Great Barrier Reef Marine Park Authority in relation to their use of lethal shark drumlines to control shark populations on the Reef 66 Government and business can also be the subject of litigation by businesses impacted by environmental pollution incidents caused by government or industry. For example, there is presently a class action being heard in the Supreme Court of Queensland on behalf of fisheries interests against the Gladstone Ports Corporation in which the claimants seek substantial damages for losses alleged to have been caused by inappropriately conducted port dredging operations. Part of the expansion involved dredged sediment being held a bunded reclamation area. This bund was designed to hold the

sediment and prevent it from escaping into surrounding waters due to the likely presence of various contaminants. It is alleged that the bund had defects and did not successfully contain the dredge, leading to catastrophic losses to themarine environment and consequential losses for a large portion of the Queensland seafood industry participants. While the dredging was conducted in State- controlled waters, the damage spread into the Great Barrier Reef World Heritage Area. As a result, the activities said to have caused the losses are subject to a complex web of overlapping State, Federal and World Heritage (i.e. international treaty) obligations, as both Queensland legislation and Federal legislation implementing treaty obligations applies. Climate change risk generally has also become a more prominent issue for Australian companies in recent years. There is increased pressure on directors (particularly those in industries likely to be negatively affected by climate change) to consider such risks in the context of their director’s duties and to ensure the company makes appropriate disclosures in its annual report.

Inadequate disclosure of climate change risks in annual reports could expose directors and senior management to litigation risk arising from activist shareholders pursuing legal action against Australian listed companies and regulatory scrutiny from Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC). Tourism and other industries with exposure to environmental damage occurring on the Reef may be impacted by changing shareholder expectations. These risks are highlighted by the recent memorandum by Noel Hutley SC on the obligations of directors 67 , as well as recent advice from the ASIC 68 andAustralian Stock Exchange 69 supporting increased disclosure of climate related risks.

67 and-2016_pdf.pdf 68 climate-change-related-disclosure/ 69


66 Humane Society International (Australia) Inc and Department of Agriculture & Fisheries (Qld) [2019] AATA 617




Ensuring the Reef is resilient to perils such as climate change presents a complex challenge for both government and industry. Maintaining its long term sustainability and guaranteeing the Reef remains a social, cultural and economic resource for generations to come must be a priority. Industry in and around the Reef should be aware of the physical, transition, and litigation risks associated with climate change and the Reef, as well as the opportunities to shape its long term prosperity.

The Reef is just one location which will require climate change adaptation; however all across Australia there are challenges, risks, and opportunities. As a firm we remain committed to mapping and understanding climate change risk alongside a growing network of cross- sector experts and collaborators, to help our clients navigate the rapidly evolving risk landscape they face.

Clyde & Co is a dynamic global law firm with a pioneering heritage and a resolute focus on its core sectors of insurance, energy and resources, infrastructure, transport, and trade and commodities. With over 1,800 lawyers operating from over 50 offices and associated offices across six continents, the firm advises corporations, financial institutions, private individuals, and governments on a wide range of contentious and transactional matters. If you would like to understand how Clyde & Co can help you in this regard please contact our core team.


Key contacts and contributors

With special thanks to Clyde & Co colleagues and external contributors for their comments:

– Obtaining and complying with environment and development approvals and licences, advising on requirements for environmental assessment and acting in appeals – Responding to regulators and acting in investigations and enforcement proceedings – Identification and management of environmental risks, including pollution, waste, contamination, and climate change

Jacinta Studdert Partner, Sydney T +61 2 9210 4930 E

Kristyn Glanville Senior Associate, Sydney T +61 2 9210 4911 E

– Understanding the potential application of parametric insurance products to environmental risks – Complying with financial disclosure obligations and director’s duties

Avryl Lattin Partner, Sydney T +61 2 9210 4425 E

Nigel Brook Partner, London T +44 20 7876 4414 E

Yvonne Lam Senior Associate, Sydney T +61 2 9210 4413 E

Wynne Lawrence Senior Associate, London T +44 20 7 876 5621 E

Adam Davis Technical Director – Sustainability & Resilience, AECOM Australia Pty Ltd E Chip Cunliffe Co-Chair – Ocean Risk and Resilience Action Alliance Secretariat

– Responding to third party litigation risks, including acting in class actions

Maurice Thompson Partner, Melbourne T +61 3 8600 7201 E


– Managing workplace, health, and safety risks associated with climate change on employees

Alena Titterton Partner, Sydney T +61 2 9210 4577 E

Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde & Co LLP. Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. © Clyde & Co LLP 2019 #clydecoresilience

Clyde & Co LLP

J471293 - November 2019

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