Gas giant Santos told investors it had a clear plan to achieve net zero emissions by 2040 but had no evidence to back it up, the Federal Court has heard during the first morning of litigation against the gas giant.

The landmark legal case over alleged "greenwashing" of the firm's climate credentials was launched in 2021.

Shareholder activist group the Australasian Centre for Corporate Responsibility (ACCR) has alleged the fossil fuel company engaged in misleading and deceptive conduct towards investors.

The ACCR has accused Santos of "greenwashing" in its claims it would reach net-zero emissions by 2040 and that its blue hydrogen projects would be emissions-free.

Santos is defending the claims, and its lawyers will deliver their opening statements later on Monday and Tuesday.

The ASX-listed company, worth about $22 billion, operates onshore and offshore oil and gas projects in Australia, the US, Papua New Guinea and Timor-Leste.

The ACCR says it's the first case of its kind in the world using consumer and corporate laws to challenge the veracity of a fossil fuel company's claims of being able to create clean energy and achieve the target of net zero emissions. 

Santos allegedly sent 'a clear, powerful message' 

In its opening statement, the ACCR's barrister, Noel Hutley SC, told a Federal Court hearing in Sydney that Santos sent "a clear, powerful message" to investors in its 2020 annual report that laid out a pathway to achieve net zero emissions by 2040.

The shareholder advocacy group claims Santos lacked a proper basis for asserting it had a defined path to reduce emissions by 26 to 30 per cent by 2030, and reach full net-zero status by 2040, as it outlined in a 2020 report to investors.

"There is a clear, credible road map that [Santos chief executive Kevin Gallagher] set out and wanted the market to hold him accountable for," Mr Hutley argued.

"That's not what [Santos] said. To say it was just possible, would have put it in the class of aspiration, which is what they [Santos] were seeking to say they had moved beyond."

Mr Huntley said Santos "went out of its way" to tell investors its plan towards net zero went beyond "mere ambitions … to be clear and tangible".

"The reality of this case is the so-called plan was not a plan at all.

"It was a series of speculations without the kind of modelling that is reasonable for statements of this kind."

The court heard that Santos would argue no reasonable investor would have believed the company was predicting to achieve net zero by 2040 in the particular way set out in its road map.

The ACCR also argues Santos misrepresented natural gas as "clean energy" and portrayed blue hydrogen (which is produced from natural gas) as emissions-free. 

The organisation is relying on a barrage of documents including Santos's 2020 annual report, briefings on the ASX's Investor Day site, and a 2021 climate report.

Common investor would understand the plan: Santos 

Santos began its opening statement late in the day. It is likely to continue on Tuesday. 

Santos's barrister, Neil Young, argued no reasonable investor would have believed the company had every detail of its plan to reach net zero ready to roll out.

He said it was reasonable to assume the common investor would know natural gas would be needed to transition to net zero "for a company in Santos's position". 

"Natural gas is a transitional fuel that emits fewer emissions than other fossil fuels," Mr Young said. 

He also argued the term "clean hydrogen" was used interchangeably in the company's documents with other terms that showed the company did not believe the fuel meant it created zero emissions. 

Mr Young told the court it did not misuse the word "clean" and that it was "fanciful" to assume it meant gas did not emit any carbon dioxide.

The trial will run for roughly three weeks.