Australian pension fund REST has settled a climate change-related litigation brought against it two years ago by one of its members, a move that UK-based lawyers said pension funds there should also take note of.
In a statement, the A$56bn (€34bn) retail employees superannuation fund today said climate change was a “material, direct and current financial risk” to it “across many risk categories” and that it agreed with the plaintiff – Mark McVeigh – “to continue to develop its management processes for dealing with the financial risks of climate change on behalf of its members”.
The settlement appears to involve REST making several commitments related to climate change. In its statement, REST said McVeigh “acknowledges and supports” its initiatives, to, inter alia:
- implement a long-term objective to achieve a net-zero carbon footprint for the fund by 2050;
- publicly disclose the fund’s portfolio holdings;
- enhance the pension fund’s consideration of climate change risks when setting its investment strategy and asset allocation positions, including by undertaking scenario analysis in respect of at least two climate change scenarios, including one scenario consistent with a lower-carbon economy well below 2°C this century; and
- actively consider all climate change-related shareholder resolutions of investee companies and “otherwise continue to engage with investee companies and industry associations to promote business plans and government policies to be effective and reflect the climate goals of the Paris Agreement”.
McVeigh brought the case to the federal court of Australia in 2018, the first time a member of a superannuation fund took a fund to court over a lack of information about climate change risk and any plans to address this. The settlement comes as a trial was due to take place in Sydney this week.
In the UK, Joanne Etherton, climate finance lead at environmental lawyers ClientEarth, said REST’s commitments in the settlement were significant both in climate terms and “for the signal they send to the market”.
This was not just the case with respect to Australia, with Etherton saying the outcome “should also raise the heart-rate at pension funds in the UK, as there is a very real risk of litigation for funds which are not taking climate risk into account here”.
“For those pension providers behind the curve on this, it would be in their interests to read the settlement carefully and get their houses in order.”
At pensions law firm Sackers, partner Stuart O’Brien said the case did not translate directly to UK pension funds as the outcome was a settlement rather than a binding judgement and anyway pertained to regulations governing Australian pension funds.
“However,” he added, “the principles on which the member brought his claim have a lot of parallels with UK trustee fiduciary duties, so I think there is a read-across that to comply with fiduciary duties trustees should be thinking of the same things.”
He said it also raised the “interesting question” of whether there could be a similar case in the UK.
Setting net-zero targets is beginning to catch on among larger UK pension investors, who are also facing increased disclosure and governance requirements to do with climate change. Cbus, the Australian building and construction industry pension fund, joined the UN Net-Zero Asset Owner Alliance earlier this year.