Australian Pension Fund Acknowledges Climate Risk, Commits to Net Zero in Landmark Settlement of Climate Lawsuit
A first-of-its-kind climate lawsuit in Australia over a retirement fund’s obligations to disclose climate-related risks to fund beneficiaries has concluded in a settlement that could send the widespread signal to financial markets and asset managers that the climate crisis is a material financial risk that must be taken seriously.
In a statement issued November 2 regarding the settlement in the case McVeigh v. Retail Employees Superannuation Trust, the Australian superannuation fund REST acknowledged “that climate change could lead to catastrophic economic and social consequences” and that it “is a material, direct and current financial risk.” The fund agreed to commit to reaching a net zero carbon footprint by 2050, in addition to other climate-related commitments.
Mark McVeigh, a 25-year-old from Brisbane who first filed the landmark case against his pension fund in 2018, said the outcome represents a “groundbreaking recognition” of climate risks to the economy and society and that it gives “reassurance” to the fund’s nearly 2 million members that their retirement savings will be responsibly managed in the face of the climate crisis.
The Retail Employees Superannuation Trust manages almost AU$60 billion (US$40 billion) in assets and is one of the largest retirements funds (called superannuation) in Australia. The pension or superannuation industry in Australia is worth AU$3 trillion and is the fourth largest asset pool in the world, according to Equity Generation Lawyers, the Australian law firm that represented McVeigh. This case marked the first time an Australian pension fund faced litigation over climate change risks.
The settlement on Monday, November 2 came just as the case was set to go to trial in Sydney. McVeigh sued two years ago alleging REST violated Australian federal law including the Corporations Act and the Superannuation Industry Act, with claims centered on financial risk disclosures concerning climate change. The global financial and investment community is increasingly warning of such risks like the expected decline of fossil fuels as the world transitions to clean energy as well as physical risks to infrastructure from climate disasters.
The Task Force on Climate-Related Financial Disclosures (TCFD), for example, states that climate change is a financial risk to the global economy and provides recommendations for corporations and funds to disclose and manage climate risks. The REST fund, per the settlement of the McVeigh case, has agreed to follow these recommendations and encourage investee companies to disclose climate risks in line with TCFD guidelines.
“Rest agrees with Mr. McVeigh to continue to develop its management processes for dealing with the financial risks of climate change on behalf of its members,” the fund said in a statement posted on its website.
According to David Barnden, a lawyer with Equity Generation Lawyers, the settlement agreement could send ripples through the pension and financial sectors in Australia and beyond.
“This outcome should represent a significant shift in the market's willingness to tackle climate risk — a shift which should set a clear precedent for the industry in Australia, and also pension funds around the world,” Barnden said in a statement, as reported by the Australian news service ABC News.
Equity Generation Lawyers is currently representing another 20-something Australian, Melbourne law student Katta O’Donnell, in a similar lawsuit on disclosure of climate-related financial risks, in this case to holders of Australian government bonds. That case was filed in July this year as a class action against the Australian government.