Two shareholders have launched legal action against the Commonwealth Bank of Australia for allegedly failing to adequately disclose the risk climate change poses to its financial position.

Proceedings have been filed in the Federal Court on behalf of shareholders Guy and Kim Abrahams claiming the bank did not disclose the risk in its 2016 annual report.

The shareholders alleged it was a breach of the Corporations Act which required businesses to give a true and fair view of their financial position and performance.

Earlier this year, one of Australia's financial regulators warned climate change could threaten the stability of the entire financial system, as it prepared to apply climate change "stress tests" to the nation's financial institutions.

Case could set precedent

Geoff Summerhayes, an executive board member of the Australian Prudential Regulation Authority (APRA), said it expected big companies to carefully consider the risks and warned company directors could be liable if they failed to do so.

A lawyer for Environmental Justice Australia, David Barnden, said the Federal Court action would be a test case which could have wide-ranging repercussions.

"This case is the first of its kind to test the extent of climate change risk disclosure in annual reports," he said.

"It should set an important precedent that will guide other companies on disclosing climate change risks."

The claim sought an injunction to stop the Commonwealth Bank from making similar omissions in future annual reports.

The bank's 2016 annual report discussed climate change as an environment, social and governance priority.

'Financial interest' in climate change

Mr Barnden said it should have been disclosed as a major or material risk.

"Generally climate change risks pose financial risks to a bank like CBA by virtue of the bank receiving mortgage repayments from people who own residential housing on the coast — those houses might be at risk from things like sea level rise," he said.

"There's other financial risks that CBA has in terms of its loans to fossil fuel companies.

"So as the market adjusts to a low carbon economy, the bank may not receive those repayments."

Shareholder Guy Abrahams is a climate change advocate who bought shares in the bank 25 years ago.

"As their customers and as their shareholders and even people who invest through their superannuation would have a financial interest, most of them, in the Commonwealth Bank, this is a matter of public interest," Mr Abrahams said.

"This is a really important issue and I think the bank should lead by example."

Mr Barnden said there was also reputational risks for the bank with shareholders raising concerns about the bank's position on funding Adani's proposed Carmichael coal mine.

"We say that the Adani mine is a substantial matter of concern for the Australian public and that the shareholder needs to know how the bank is dealing with that concern," he said.

The Commonwealth Bank has been contacted for comment.