By Ruth Williams
Industry super fund REST is facing a new federal court legal battle over claims it breached its trustee duties by failing to properly factor climate change-related risks into its investment decisions.
Mark McVeigh, a 23-year-old ecology graduate and council worker from Brisbane, has racheted up his legal campaign against the super fund over its approach to climate change, accusing REST of breaching superannuation law by failing to act in his best interests.
REST is the default industry super fund for many retail workers.
Mr McVeigh’s lawyer David Barnden, from Environmental Justice Australia, said the fresh allegations formed a “significant” amendment to a legal claim lodged in July, in which REST was accused of not disclosing enough information about climate risk.
A new amended concise statement, lodged in the federal court late last month, alleges REST failed to discharge its duties as a trustee to act with “care, skill and diligence” in relation to the impact of climate change, which it argues posed “material or major risks” to “many” of the super fund’s investments.
Former federal court judge Ron Merkel QC is working on the case, along with barrister James Mack, who co-authored an opinion with Noel Hutley QC late last year suggesting trustees must consider climate change risk to meet their requirements under law.
Mr Barnden said the legal action would be “watched closely by the superannuation community”, saying it was an important test case for how investors and asset owners around the world dealt with climate change.
REST told Fairfax Media that one of its members was “seeking clarification from the Court about the requirements of superannuation funds to disclose the basis of particular investment decisions”, adding that it had asked to meet with the member “on multiple occasions to understand his concerns although so far he hasn’t responded”.
“The member wants us to publish specific material about how we deal with climate change risk as an explicit standalone category of risk,” it said. “REST considers climate change risk as part of its assessment of all operating and investment risks when making decisions about what is in the best financial interests of all members.”
It called on the federal government to develop a national energy policy that provided certainty for investors and consumers.
Mr Barnden said his firm and Mr McVeigh were happy to meet with REST if “they had more information to provide”.
Mr McVeigh joined the $50 billion fund in 2013 when he started a job at Woolworths. Last year, he emailed REST seeking information about its approach to climate change risk, but was unhappy with the response.
His case was picked up by Environmental Justice Australia, which has run several actions exploring legal questions on climate change and investment risk. In 2014, it represented the Australasian Centre for Corporate Responsibility in an ultimately unsuccessful Federal Court case centred on shareholder resolutions and climate risk disclosure; in 2017, it acted for two Commonwealth Bank shareholders seeking more information from the bank about climate risk.
Mr McVeigh’s first claim, lodged in July, called for REST to disclose information the member said he needed to make an “informed decision” about his super, including the fund’s knowledge, opinion and actions on climate risk.
“As a young person, climate change is a pretty big deal… you have got to start thinking about what the world is going to look like in 50 years’ time,” said Mr McVeigh, who will not be able to access his super until 2055. “It’s on a lot of our minds.”
Listed companies worldwide are coming under pressure from investors and regulators to disclose how climate change may impact their businesses, with the Australian Securities and Investments Commission last month finding that few companies were disclosing climate change as a “material risk”.
News of the lawsuit comes ahead of the launch on Wednesday of a report about superannuation, climate change and Millennials, launched by the Future Business Council’s offshoot, Future Business Generation. The report calls on Australia’s $2.6 trillion super industry to adopt a more sophisticated approach to climate risk, including by adopting new disclosure rules nailed down by a G20 task force headed by Michael Bloomberg, known as the TCFD.
It also comes amid heightened focus on the role and performance of super trustees following damaging revelations about the super sector out of the Hayne royal commission. REST was itself the subject of a series of open findings by counsel assisting, including that it may have breached its duties by charging members premiums for life insurance they could never claim.
This story was published by The Sydney Morning Herald on 3 October 2018.