Melbourne law student Kathleen (Katta) O’Donnell is taking the Australian government to court for allegedly failing to disclose the climate risks of issuing sovereign bonds.
The O’Donnell vs Commonwealth case, filed to the Federal Court on 22 July, alleges that climate change impacts an investor’s decision on whether or not to trade bonds, and that the Commonwealth of Australia failed to disclose climate change risks to investors.
The case alleges that Australia’s economy and reputation in international financial markets is affected by the government’s ability to respond to climate change.
“The Australian government is borrowing against my future: a future threatened by its failure to manage the climate crisis,” O’Donnell said.
“Almost every young working Australian will, like me, own bonds through their super fund, but like all investors, we are in the dark over how the government is exposed to climate risk.”
O’Donnell is a 23-year-old investor of bonds outside of her superannuation, though most Australians are invested in government bonds through their super as it is considered one of the safest forms of investment.
Investors will be watching the case, because if O’Donnell wins, climate risk disclosure may become a legal requirement for the first time.
Bonds, like shares, can rise and fall in value, and become less attractive to investors if they are doubtful about a government’s ability to repay them.
Because of the alleged disclosure breach, Commonwealth officials failed to perform their disclosure duties to the required standard, the case claims, and misled and deceived investors.
“While the current government will be long out of power by the time we can access this money, our financial security as well as the world around us will bear the brunt of its climate legacy.”
O’Donnell is represented by Equity Generation Lawyers. The firm’s principal, David Barnden, said economies will be disrupted as global warming worsens, putting bond repayments at risk.
“Australia is on the frontline of sovereign climate risk. We confront the harrowing physical impacts of drought and bushfires, and we also face the financial risks of an economy over-exposed to fossil-fuels being left behind as the world shifts to clean energy.”
Australia’s corporate and prudential regulators, ASIC and APRA, have long been warning financial institutions about transparency and disclosure of climate risks.
The case is a class action – O’Donnell represents other investors who trade bonds on the ASX.
It doesn’t aim to pursue any damages, just a declaration that the Commonwealth breached the law, and seeks an injunction to force the government to stop promoting bonds until the disclosure information is updated to include climate change risks.
Market Forces is an organisation that compares financial institutions based on their investment into fossil fuels.
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