A $57 billion super fund has agreed to ensure its actions comply with a “net zero carbon footprint”, after a 25-year-old Australian sued it for failing to act on climate.
The Retail Employees Superannuation Trust (REST) settled with Mark McVeigh on Monday evening, after McVeigh claimed the super fund was not acting in his best interests by failing to factor in the effect the climate crisis would have on his investments.
McVeigh first brought the action to the Federal Court in 2018. The ecology student claimed REST didn’t provide him with information on how the huge fund was managing climate risk and was breaching its fiduciary duty.
Super funds are legally required to act with care and skill to deliver the best results for their members and mitigate risks to their portfolios. McVeigh argued REST had failed to do this by not accounting for the risks of fossil fuel infrastructure being damaged by extreme weather, or falling in value.
REST said climate change poses a “material, direct and current financial risk” and that it accepted its responsibility was to “actively identify and manage these issues”.
“Today’s settlement gives me, and REST’s almost 2 million members, the reassurance that we need to know that our retirement savings will be invested responsibly in the face of the climate crisis,” McVeigh said in a statement.
“This case is a ground-breaking recognition of the material financial risk that climate change poses to the economy and society, and the role that super funds have in managing it.
“I hope it will go some way to catalysing the Australian super fund industry, which, with almost $3 trillion under management, has the potential to make or break our climate response.”
McVeigh’s lawyer, director of Equity Generation Lawyers David Barnden, said the case has “far-reaching” implications, as it marks the first time a major super fund has settled over climate change risks.
“It is clear that the bucks stops with board members, and managing climate risk cannot be delegated away,” Barnden said.
“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 is also representing 23-year-old Katta O’Donnell who is suing the Australian Government for allegedly failing to disclose the risks the climate crisis poses to government bonds.
The REST case marks the first time an Australian superannuation fund has been sued over the climate crisis, with most other legal actions taking place in the USA and Europe.
The settlement includes an agreement that the fund will achieve a net zero carbon footprint by 2050, and will enhance its consideration of climate risks. It will also make investment decisions in line with recommendations from the Task Force on Climate-related Financial disclosures, which works to highlight companies’ climate risks.
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