On the move? Listen to below
Honestly, the thought crosses my mind all the time.
I imagine a confident female lawyer strutting into a courtroom. An Erin Brockovich or Ruth Bader Ginsburg in slow motion.
The room is tense, bustling and brimming with excitement.
Micronesians, marine biologists, animal rights campaigners, shareholder activists, school strikers, you name it. All sit muted, wide-eyed and with bated breath.
She slams a manilla folder down onto the bar directly in front of the judge. "I rest my case".
All sound leaves the room, like the vacuum of space.
The judge pauses momentarily before bringing down the gavel in a resounding crack. "Guilty! On all counts of environmental terrorism and crimes against the future of humanity!"
The courtroom erupts with applause and cheers. What a moment.
But, sadly... that's just not how this all works.
The truth is far less dramatic. Countless hours pouring over documents, biblical in size. Phone calls, fact-checking, legal roadblocks, the occasional Cease & Desist letter.
Funny term that one; two words that mean the same thing... No doubt strung together to appear more formidable to the respective recipient.
But yes, the path to righteous victory against the establishment for crimes against us and our planet is a winding and precarious one.
But luckily, there are incredibly selfless and brave people among us who give enough of a shit to tackle it, head-on.
In this journal entry, I want to share with you two incredibly inspiring individuals, Mark McVeigh and Katta O'Donnell, and the law firm that represents them.
One is taking on the superannuation industry, the other the Australian government.
The two are essentially the same age on paper but they're lightyears ahead of their early twenties.
Let's dig in.
Mark vs Superannuation
The court battle over climate change that could shake the superannuation industry
Back when Mark McVeigh was a 22-year-old ecology student in Brisbane, it dawned on him to pose a question to his super fund: "How are you managing the financial risks associated with climate change?"
The fund in question is REST Superannuation and the response he got back was underwhelming, to say the least.
They manage an enormous $60 billion worth of assets (US$40 billion)
It's the 11th largest fund in Australia and 124th largest in the world, with around 1.7 million members. It's a juggernaut.
WTF is superannuation anyways?
For those who don't know the ins and outs of super, here's the simplest breakdown I know of.
A small portion of your pay cheque goes into your super fund. Your super fund invests that money in companies. A portion of the profits from those companies goes back into your super. The cycle repeats.
Most people have no idea how ridiculous large Australia’s super industry is.
It's the fourth largest pool of money in the world. Three trillion dollars.
That makes it more than Apple's net worth, more than India's GDP and more than all military budgets around the world. It's a shitload of cash.
As you can imagine, it plays a significant role in the industries it finances. And guess what? REST has zero fossil fuel exclusions. Yikes.
Just like any typical business they're singularly focussed on making money. The main difference is that the sole purpose of a super fund is to grow the retirement money of their members until they can access it in retirement.
Except most super funds bet against our future by investing in fossil fuels with our own money.
So, do they disclose these dirty investments publically? Nope.
And THIS is the crux of Mark's lawsuit against REST.
Climate change and financial risks
Mark's not gonna be able to access his super money until 2055.
And, as I've just described, investing for the long-term is why super funds exist. However, climate change impacts are unfolding now and investors have to take immediate action to keep things in the black.
If investors fail to assess climate change's role in affecting investment, they're gonna lose, and so are we.
Mark's request for info from REST kicked off after reading an article by APRA (Australia’s superannuation regulator): Australia's new horizon: Climate change challenges and prudential risk.
In the article, APRA refers to climate change risks as ‘material, foreseeable and actionable now’.
"if entities’ internal risk management processes are not starting to include climate risk as something that has to be considered – even if risks are ultimately judged to be minimal or manageable – that seems a pretty reasonable indicator there might be something wrong with the process. Similarly, if you’re an investor and you’re not already asking questions about how the companies you invest in approach these issues – perhaps you should be." — Geoff Summerhayes, APRA Executive Member
Legal heavyweights, respected commercial barristers Noel Hutley SC and James Mack, published a piece a few months before Mark first contacted REST.
The barristers advised: "It is the treatment of climate change as a financial risk (as distinct from the treatment of climate change as an environmental, social or governance issue) that trustee directors ought to consider..."
Ok, so we've got some big-name lawyers and one of the most prominent financial regulators calling for some decent bloody leadership and financial responsibility in the face of the climate emergency.
About a year after Mark's first request, and several letters between him and the fund, Mark felt pretty damn dissatisfied with REST's response.
So, in July 2018 Mark filed a case against REST’s trustee in the Federal Court of Australia. Boom! It's on.
The claim alleges that Mark had a right to certain information under section 1017C of the Corporations Act. The legislation requires the fund to give that information to members like Mark to make an informed judgement about the management and financial condition of the fund.
"The pleadings describe the impacts caused by physical and transition risks that exist due to climate change and the Paris Agreement. The claim alleges climate change risks to the fund were ‘material, foreseeable and actionable now’." — Generation Equity Lawyers
The Concise Statement, now superseded, is available here.
The filing of the legal action was first reported by the ABC.
So what happened next?
After his claim was filed, the conversation with REST swiftly picked back up again. But, Mark remained dissatisfied with their responses. A serious question arose as to whether REST's trustee was doing enough to manage climate change risks.
Mark then filed an amended claim: the trustee had failed to satisfy the duties it owed to Mark when investing his money.
You can read all about the specifics here, but here's my summary:
- Super funds must act in the best interests of members, and to exercise care, skill and diligence to the standard of a prudent superannuation trustee when investing. Do the right thing with our money, basically.
- Investment managers and boards must consider climate change risks
- Internal processes and public disclosures have to be in line with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).
You can read the full claim here.
The Age and Sydney Morning Herald newspapers first reported on the trustee claim here. The Australian Financial Review reported on the significance of the orders here. The trial will take place on 2, 3 and 4 November 2020 in Sydney.
There's more to it, but for brevity, I'll leave you to follow along here, so stay tuned.
O’Donnell vs The Commonwealth
Australian student sues the government for failing to make climate change-related risks clear to investors in government bonds.
Enter Kathleen (Katta) O’Donnell.
The 23-year-old student who's behind the first-ever legal action seeking to hold the Aussie Government to account over climate change risks.
What a boss move!
Her claim was filed in Federal Court of Australia on 22 July 2020. So at the time of writing, this is still fairly warm off the press!
Katta's claim alleges that "Australia’s economy and the nation’s reputation in international financial markets will be significantly affected by the adequacy of the Australian government’s response to climate change. As a result, investors who trade in Australian government bonds face material risks from climate change. The claim alleges that risks arising from climate change should be disclosed to investors like Katta."
So essentially what's going on here is, the current government has been making terrible decisions that reduce investors' potential profits and that's just bad for business.
Katta is among countless retail investors, pension funds, central banks, insurers and hedge funds who, combined, have loaned the Australian government over A$700 billion. That's a lotta moolah.
But, as with Mark's lawsuit, by failing to disclose climate change risks to investors, the Commonwealth of Australia is in breach of its duty of disclosure and is essentially misleading and deceiving investors.
Her claim alleges that because of disclosure breaches, the Commonwealth fails to perform duties to the requisite standard.
Australian legislation requires Commonwealth officials to act with a standard of care and diligence of a reasonable person in their position. The standard is essentially the same legal standard imposed on company directors in Australia.
Things we know for sure
- Climate change spells significant material risks to financial stability
- The head of Australia’s Bar Association, Noel Hutley SC, and respected barrister Sebastian Hartford-Davis, confirmed that company directors should take climate change risks into account.
- We must limit global warming to 1.5 degrees.
Ms O’Donnell’s claim refers to the Paris Agreement’s goal of limiting warming to 1.5 degrees Celsius and the flow-on impacts on stranded assets, likely legal challenges and inevitable changes to the economy.
Katta owns Australian Government Bonds that mature in 2050, by which time—should the government fail to enact effective policies—the impacts of climate change are expected to be severe.
You can read more detail on all of this over at Equity Generation Lawyers, but high level, these are the types of risk factors that climate change poses to sovereign bonds:
- Response to climate change
- Resilience to climate change
- Reputational risk
- Financial risks
- Credit rating risk
Oi government, disclose your investments!
O’Donnell v The Commonwealth is a world-first case in dealing with climate as a material risk to the sovereign bond market. Katta is a trailblazing climate champion!
Sovereign bonds are issued by nation-states to fund government expenditure. Investors and regulators around the world have long understood that climate change poses material risks to companies and financial institutions.
ASIC and APRA, big Australian corporate watchdogs, have both told companies and funds to understand and disclose climate change risks. Also, Australia’s independent central bank, the Reserve Bank of Australia, has warned of systemic climate risks to Australia’s economy and subsequent impacts on major financial institutions.
Long story short, we've got clear guidance from regulators, but business and government are sticking their heads in the sand.
Visit Equity Generation Lawyers for the full rundown.
Speaking of which...
Equity Generation Lawyers vs The Establishment
Mark and Katta are represented by Equity Generation Lawyers, Specialists in Australian climate change law.
A combination of expertise in climate change risk, climate science, policy, regulation and innovative legal action makes them specialists in understanding the physical and transitional impacts of climate change on investors, governments, people and the environment.
I met both Mark and David Barnden, Principal Lawyer, at a pub in Glebe in 2018. Humble, softly spoken but ardent in their focus on challenging the status quo. I'm thrilled that after all this time, they're still fighting the good fight.
In summing up...
In a nutshell, climate change risks are fact. Financial institutions and governments aren't taking that into account and jeopardising our money and future. Young people are leading the way, David & Goliath style.
Bring on the lawsuits!
*continues to daydream about a courtroom erupting in applause and cheering*
Thanks for stopping by,