- The recent settlement of one of the world’s most-watched climate lawsuits has raised the bar for responsible corporate risk management in Australia.
- In a statement announcing the settlement, Rest super fund acknowledged that climate change is a ‘material, direct and current financial risk’ to the fund and is an important concern of its members.
- The fund’s statements are a strong signal to other Australian companies that they would face a difficult task in arguing that climate change is not a financial risk that triggers a range of legal obligations, including but not limited to disclosure.
When can a settlement form a precedent? It’s a philosophical question, rather than a legal one, and is posed slightly tongue-in-cheek. The technical answer, of course, is that a settlement, by definition, occurs in the absence of a judicial determination and cannot form a precedent that must be followed by anyone not party to that particular agreement. But in the wake of the recent settlement of one of the world’s most-watched climate lawsuits in early November 2020, there has been considerable debate over whether this particular settlement could form a precedent for practical purposes. (https://rest.com.au/why-rest/about-rest/news/rest-reaches-settlement-with-mark-mcveigh).
The case was McVeigh v Retail Employees Superannuation Pty Ltd, in which a young member of the super fund known colloquially as ‘Rest’, claimed Rest was in breach of obligations owed under the Corporations Act 2001 (Cth) and the Superannuation Industry (Supervision) Act 1993 (‘SIS Act’).
As two of the present authors previously wrote in this journal, (Coutts & Millar, ‘Risky Business: super case heats up climate debate’, Law Society of NSW Journal, Issue 63, Feb 2020, 68-71), McVeigh requested the Federal Court: ‘to force REST to provide a detailed, granular view of how it thinks its investments might be affected by climate change – including higher temperatures; more frequent and intense storms, droughts, fires, floods; disrupted supply chains; potentially plummeting values of certain companies whose businesses involve emitting greenhouse gases; and all of the social and political turmoil those changes will continue to exacerbate.’ After defending the lawsuit for more than two years, Rest settled the claim on the morning the matter was set to go to trial.
Fund’s statements a strong signal to other companies
Rest agreed to set a target of reducing the overall greenhouse gas emissions of its portfolio to ‘net-zero’ by 2050. This topped off several steps that Rest had already taken, since McVeigh’s suit was lodged, with respect to climate disclosures.