Australian super fund agrees to factor climate crisis into decisions in ‘groundbreaking' case

Legal settlement recognizing risk that climate change poses to economy and society has ‘far-reaching’ implications.

A $57bn Australian superannuation fund has settled a court case with a 25-year-old member who accused it of failing to act in his best interests by not properly considering the risks the climate crisis poses to investments.

The settlement between the Retail Employees Superannuation Trust and Mark McVeigh, reached as a trial was due to start on Monday, requires the fund to ensure its actions are consistent with “net zero carbon footprint” by 2050.

The case was described as the first legal test of whether the requirement that super funds must keep members informed applied to climate-related risks, including an expected fall in demand for fossil fuels and a rise in damage to infrastructure due to extreme weather linked to rising global temperatures.

As part of the settlement, the fund committed to disclose its full portfolio holdings, conduct climate scenario analysis to inform its investment strategy and advocate for the companies it invests in to comply with the goals of the Paris agreement.

In a statement, it acknowledged that climate change could lead to catastrophic economic and social consequences and was an important concern of its members.

“Climate change is a material, direct and current financial risk to the superannuation fund across many risk categories, including investment, market, reputational, strategic, governance and third-party risks,” the fund said.

McVeigh said the settlement was “groundbreaking recognition” of the risk that the climate crisis poses to the economy and society and would give the trust’s nearly 2 million members assurance that their retirement savings would be invested responsibly.

He said he hoped it would trigger similar commitments across the super fund industry. “With almost $3tn under management, [the industry] has the potential to make or break our climate response,” he said.

McVeigh’s lawyer, David Barnden, of Equity Generation Lawyers, said it was the first time a major Australian super fund had agreed to settle a case about the financial risk of climate change and what it needed to do to protect its members.

“The implications of this case are far-reaching for investors and for the climate,” Barnden said. “It is clear the buck stops with board members and managing climate risk cannot be delegated away.”

McVeigh launched the action in the federal court in 2018, shortly after he graduated from the University of Queensland with a degree in ecology.

His case claimed under the Corporations Act the fund must seek information about climate risks and comply with the recommendations of the Task Force on Climate-related Financial Disclosures (TFCD), a global body that aims to highlight companies’ exposure to risks related to the climate crisis.

The settlement includes an agreement from the fund that it would measure, monitor and report outcomes in line with the task force’s recommendations.

Barnden is also representing a 23-year-old university student who has accused the Australian government of misleading investors in sovereign bonds by failing to disclose the financial risk caused by the climate crisis. He is running a separate class action on behalf of young people from across the world which is trying to stop an extension of Whitehaven’s Vickery coalmine in north-west NSW.