Ground breaking climate change lawsuit settles on court house steps

After more than two years, and on the day the trial was due to commence, the ground-breaking climate change lawsuit brought against one of Australia’s largest super/pension funds, the $57 billion Retail Employees Superannuation Trust (REST) by a 25 year old fund member, Mark McVeigh, has settled in what on one view appears to be a capitulation by the fund.

After failing to provide him with adequate information he asked for on how it was managing the risks of climate change, McVeigh claimed REST failed to protect his retirement savings from the financial ravages of climate change. His aim was to have funds expressly acknowledge climate change risks as significant and to make investment decisions having specific regard to those risks. With REST's settlement agreement he seems to have achieved his objective with REST expressly stating that it acknowledges that “climate change could lead to catastrophic economic and social consequences and is an important concern of REST’s members”.

As part of the settlement yesterday, reached at the court house steps (which technically saw the litigation dismissed), REST agreed to five important steps:

1. To align its investment portfolios to a net zero emissions by 2050;
2. To advocate for investee companies to comply with the goals of the Paris Agreement, which seeks to limit global warming by 1.5 degrees Celsius;
3. To report against the Task Force on Climate-Related Financial Disclosures (TCFD);
4. To adopt the “stress test” scenario analysis under the global TCFD recommended by an international group of regulators chaired by the governor of the Bank of England, when conducting its annual review of asset investments; and
5. To publicly disclose the fund’s portfolio holdings - which is unusual for fund managers in this country.

If the case had proceeded to trial, it would have tested for the first time in Australia whether trustees have a legal duty to consider climate change as a material risk to long term investment performance.  With the settlement no legal precedent is created, but REST has gone a long way towards meeting what many have been clamouring for.

This outcome forms part of the wave of strategic climate change litigation globally using human rights law and corporate disclosure obligations. Cases are often brought by individuals and activist groups against a myriad of companies, mostly in the resource and energy sector as well as banks, financiers and investor companies. In fact, McVeigh’s lawyer has two other significant actions on foot: 

• a 23 year old is suing the government for failing to disclose risks that climate change could have on government bonds; and
• an action on behalf of “young people around the world” against the Environment minister. The action claims there has been a failure of the duty of care owed to protect young people from climate change and is seeking an injunction to stop approval of an extension to a coal mine.

For more information on this growing trend, see our previous article on the convergence of human rights law and climate change litigation here.

The settlement also occurs against the backdrop of regulators, such ASIC, APRA and the Reserve Bank, requiring greater disclosure from companies around climate change risks and the “stress testing” of assets and investments to account for climate change risks such as those which may be more adversely effected by rising sea levels, floods, storms, drought and bushfires. As well, we have recently seen some of our major banks and insurers committing to cease financing thermal coal and other such projects over the coming decades (CBA, QBE, Suncorp and ANZ).

For the full media statement from REST, see here.