The Federal Court on Tuesday found Santos did not breach corporate and consumer law through public statements over its emissions targets and environmental goals, including achieving net zero by 2040.
"It has been a David versus Goliath battle," said Brynn O'Brien, co-chief executive of advocacy organisation Australasian Centre for Corporate Responsibility, which filed the lawsuit.
"Goliath won this round.
"While the court found that Santos's conduct was insufficient to breach the law, the case has shone a powerful spotlight on how Santos's plans were developed and used to secure market advantage."
Justice Brigitte Markovic's full 250-page decision will not be published for nearly a week to give Santos time to redact sensitive material.
The case challenged claims by Santos that natural gas provided "clean energy" and that the company had a "credible and clear plan" to achieve net-zero greenhouse gas emissions by 2040.
The shareholder advocacy group's lawyers alleged the energy company's descriptions of blue hydrogen as "clean" and "zero emissions" were misleading.
Blue hydrogen is a fuel created using gas but with the resultant carbon emissions captured and stored.
The company's defence lawyers rejected allegations its climate goals lacked credibility, arguing they were always targets not promises and claimed the "clean" hydrogen fuel label was used only when accompanied by carbon credits.
Ms O'Brien said the case exposed how Santos reverse-engineered its emissions numbers to meet demand from its chief executive.
"This is troubling behaviour and should reinforce investor concern about leadership and cultural issues within the company," she said.
Santos did not respond to the allegation but told AAP it welcomed the court's decision.
The firm's evolving Climate Transition Action Plan had been approved by 85 per cent of shareholders at its annual general meeting in April.
"Santos is committed to transparent, accurate and compliant reporting," a spokeswoman said.
Its Moomba Carbon Capture and Storage project in South Australia could store more carbon dioxide in four days than 10,000 electric vehicles avoid in one year, she said.
Market Forces chief executive Will van de Pol said the result did not mean fossil fuel companies, banks and super funds were off the hook for making climate claims while still financing new coal, oil and gas projects.
"The social and economic risks of climate change are skyrocketing with worsening floods and bushfires so fossil fuel companies and their financial backers must be held to account," the head of the environmental campaign group said.
Santos had been accused of making misleading statements at a December 2020 investor day and in its 2020 annual report and climate change report, both published in February 2021.
The Australasian Centre for Corporate Responsibility had sought injunctions forcing the firm to issue a corrective notice about the environmental impacts of its operations, but it did not seek damages or compensation.
It will have to pay Santos' legal costs of defending the dismissed case.
The centre holds shares in companies such as Santos to try to force them to meet the goals of the Paris Agreement, the primary international climate change pact.
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