Category: climate liability

Landmark legal case sees Australia’s biggest superannuation fund commit to strong action on climate change after 25-year old Brisbane man sues

Landmark legal case sees Australia’s biggest superannuation fund commit to strong action on climate change after 25-year old Brisbane man sues

By Will Bugler

Australia’s largest super fund, Rest, has agreed to test its investment strategies against various climate change scenarios and commit to net-zero emissions for its investments by 2050, after a legal case brought by a 25-year-old man from Brisbane. Mark McVeigh sued Rest in 2018 for failing to provide details on how it will minimise the risk of climate change. The landmark case represents the first time a superannuation fund has been sued for failing to consider climate change.

Mr McVeigh alleged Rest had breached Australia’s Superannuation Industry Act and the Corporations Act, after it failed to provide him with information on how it was managing the risks of climate change. These risks include physical climate risks that threaten Rest’s investments, and also transition risks which arise from the decarbonisation of the global economy.

Climate change is a ‘material, direct and current financial risk’

Australian law requires trustees of super funds to act with “care, sill and diligence to act in the best interest of members – including managing material risks to its investment portfolio”. In its settlement Rest agreed that its trustees have a duty to manage the financial risks of climate change.

In Rest’s statement about the settlement it said: “The superannuation industry is a cornerstone of the Australian economy — an economy that is exposed to the financial, physical and transition impacts associated with climate change.” and went on to emphasise that “climate change is a material, direct and current financial risk to the superannuation fund”.

Rest also agreed to take immediate action by testing its investment strategies against various climate change scenarios, publicly disclose all its holdings, and advocate for companies it invests in to comply with the goals of the Paris Agreement.

Mr McVeigh’s lawyer, David Barnden, head of Equity Generation Lawyers, said the case still sets an important precedent globally. “This outcome should represent a significant shift in the market’s willingness to tackle climate risk—a shift which should set a clear precedent for the industry in Australia, and also pension funds around the world,” he said. Mr Barnden is also representing 23-year-old Katta O’Donnell, who is suing the Australian Government for failing to disclose the risks that climate change could have on government bonds.

Growing momentum behind regulation

The latest cases in Australia are part of a global movement towards stricter regulation governing the financial risks posed by climate change (see Acclimatise’s timeline charting the rise of climate law). In 2015, for example, France introduced laws mandating climate disclosure for institutional investors and asset managers and in 2017 the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure published recommendations for corporate climate disclosures. In 2019, National Instrument 51-102 Continuous Disclosure Obligations set out new requirements for firms reporting in Canada to disclose material risks in their Annual Information Form.

The implication of landmark cases such as the Rest settlement, is that super funds, pension funds, banks and other investors will increasingly require companies to understand and manage their climate risks. Earlier this year, Acclimatise worked Working with Asia-Pacific’s largest law firm, MinterEllison to produce a primer on physical climate risk aimed at Non-Executive Directors. The primer was published by Chapter Zero a global voluntary programme that connects and supports Non-Executive Directors to improve oversight and action on the issue of climate change.

Download the primer here.


Cover photo by Sippakorn, on Pixabay.
Podcast: Global law firm Clyde & Co. warns clients of a ‘wave of litigation’ from climate change

Podcast: Global law firm Clyde & Co. warns clients of a ‘wave of litigation’ from climate change

In this Acclimatise Conversation on Climate Change Adaptation, we speak with Clyde & Co lawyers Wynne Lawrence and Nigel Brook, about the emerging field of climate liability risk and the pioneering work that the firm is doing to advise its clients about how to respond.

In September 2015 the Governor of the Bank of England, Mark Carney, gave his seminal ‘Tragedy of the Horizon’s’ speech, to the insurance market at Lloyd’s of London. In it, he highlighted the severe threats posed by climate change to the financial system and warned the problem risked being ignored because of institutional near-sightedness.

“The classic problem in environmental economics is the ‘tragedy of the commons’… but climate change is a tragedy of the horizon,” Carney said, “We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors. It will impose costs on future generations that the current one has little direct incentive to fix.”

The horizon for monetary policy goes out just a couple of years, and financial stability only about a decade. Carney went on to outline the three main ways in which climate change can affect financial stability:

  1. Physical risks like storms and floods;
  2. Transition risks associated with the transition to a low carbon economy; and
  3. Liability risks, legal claims by those suffering losses due to climate change.

Much of the attention since then has been on the first two categories, the physical and transition risks, but a growing number of lawyers and pioneering legal firms are drawing attention to the third category, the liability risks.

Their work has been reinforced by a growing number of international regulations and national laws and a growing body of case law. One such firm is Clyde & Co, a global firm that focusses on five key sectors: insurance, energy, trade and commodities, infrastructure and transport. The firm soon realised that climate change posed risks to all of these sectors, and so they set up a cross-disciplinary team on climate resilience. Listen to the full podcast to learn more.

Download Clyde & Co.’s climate resilience reports here.

The global law firm Clyde & Co. launches climate change liability risks report

The global law firm Clyde & Co. launches climate change liability risks report

By Nadine Coudel and Dr Richard Bater

In March 2019, Clyde & Co. launched its climate change report Climate change: Liability risks, a rising tide of litigation‘. The report explores the liability risks that organisations have faced and continue to face as plaintiffs attempt to use the courts to further their cause or sue for damages.

The report provides a broad overview of the evolving litigation risk landscape arising from the effects of climate change, identifying some of the key themes, controversies and legal hurdles.

The authors suggest that the significance of this trend should not be underestimated, with over 1200 climate change cases having been filed in more than 30 jurisdictions to date. As both litigation approaches and scientific evidence evolve, litigation increasingly represents a powerful tool in the hands of those who seek to attribute blame for contributing to effects of climate change or failing to take steps to adapt in light of available scientific evidence.

In as much as the physical risks of climate change raise both direct and indirect implications for a diversity of sectors, so too do the associated legal risks. As Clyde & Co Partner Nigel Brook remarks, “As the volume of climate change litigation grows and legal precedents build, new duties of care are emerging and the liability risk landscape is undergoing a shift which is likely to affect a wide range of commercial sectors”.

The authors classify litigation which has been emerging over the last two decades into three broad categories:

1. Administrative cases against governments and public bodies;

2. Tortious claims against corporations perceived as perpetrators of climate change;

3. Claims brought by investors against corporations for failing to account for possible risks to carbon-intensive assets or for failing to account for or disclose risks to business models and value chains in financial reporting.

The report also addresses novel approaches that claimants are adopting when bringing climate litigation, as well as the practical and legal considerations that these give rise to.

Finally, the report looks at global trends in climate litigation and their implications for businesses in different industries around the world, highlighting the issues which should be on companies’ radars over the months and years to come. The authors indicate that climate change litigation has already been deployed against companies beyond the oil and gas majors and suggest that this trend is likely to continue.

Litigation has advanced far from being targeted at first line ‘emitters’ to being used as a means of holding companies accountable for how they respond to the physical and financial risks of climate change. Clyde & Co. plans to explore these liability risks in greater depth in future reports.


Photo by Robert Bye on Unsplash

Update to landmark legal opinion highlights growing climate liability of company directors

Update to landmark legal opinion highlights growing climate liability of company directors

By Robin Hamaker-Taylor and Nadine Coudel

An update to the landmark 2016 Hutley opinion has been released by the Centre for Policy Development (CPD) on 29th March, 2019. The 2016 opinion set out the ways that company directors who do not properly manage climate risk could be held liable for breaching their legal duty of due care and diligence.

The supplementary opinion, provided again by Noel Hutley SC and Sebastian Hartford Davison on instruction from Sarah Barker, reinforces and strengthens the original opinion by highlighting the financial and economic significance of climate change and the resulting risks, which should be considered at board-level. It puts an emphasis on five key developments since 2016 that have built up the need for directors to take climate risks and opportunities into account and reinforced the urgency of improved governance of this issue. While the 2019 opinion is rooted in the Australian context, just as the 2016 opinion, it has much wider applicability, as much of the developments discussed in the update have been simultaneously happening in jurisdictions outside of Australia.

The five areas of development covered in the 2019 supplementary opinion include:

  1. Progress by financial supervisors: The 2019 opinion suggests statements made by Australian supervisory organisations such as the Australian Prudential Regulation Authority (APRA), Australian Securities and Investments Commission (ASIC) and the Reserve Bank indicate they now all see the financial and economic significance of climate change. Similar realisations have been happening among supervisory organisations in the UK, with the Prudential Regulation Authority (PRA) due to imminently release a supervisory statement on banks’ and insurers’ approaches to managing the financial risks from climate change, following a public consultation on the matter in late 2018 / early 2019. At the European level, the wider sustainability of the financial system is under review with the European Commission rolling out its Action Plan for Financing Sustainable Growth;
  • New reporting frameworks: Three new reporting frameworks have emerged since 2016. The most broadly applicable is The Task Force on Climate-Related Financial Disclosures (TCFD) recommendations. In June 2017, the TCFD, a task force set up by the Financial Stability Board in 2015, published its final recommendations to help companies disclose climate-related risks and opportunities. The Principles for Responsible Investing (PRI) and CPD frameworks have now both aligned their climate-reporting frameworks with the TCFD recommendations. The other two reporting frameworks mentioned in the 2019 supplementary opinion are more relevant for the Australian context, and include the new recommendations on assessing climate risk materiality from the Australian Accounting Standards Board (AASB) and the Auditing and Assurance Standards Board (AUASB), as well as the updated guidance from the ASX Corporate Governance Council;
  • Mounting investor and community pressure: Investors and community groups are increasing voicing concern around climate risks;
  • Development of the scientific knowledge: The UN Intergovernmental Panel on Climate Change (IPCC) published a special report on the impacts of 1.5 °C warming in 2018. The opinion recognises this as a “notable development in the state of scientific knowledge” that affects the gravity and probability of climate risks which directors need to consider; and     
  • Advances in attribution science: Important developments in attribution science have now made it easier to identify the link between climate change and individual extreme weather events.

The opinion suggests management of climate risks will require engagement with company directors in certain sectors in particular. These include banking, insurance, asset ownership/management, energy, transport, material/buildings, agriculture, food and forest product industries.

CPD CEO Travers McLeod, explains the implications of this supplementary opinion for company directors, stating “the updated opinion makes it clear that the significant risks and opportunities associated with climate change will be regarded as material and foreseeable by the courts. Boards and directors who are not investing in their climate-related capabilities are exposing themselves and their companies to serious risks”, according to a press statement.

Mr Hutley and Mr Hartford Davis write “the regulatory environment has profoundly changed since our 2016 Memorandum, even if the legislative and policy responses have not” […]“These developments are indicative of a rapidly developing benchmark against which a director’s conduct would be measured in any proceedings alleging negligence against him or her.”

The 2019 update to the 2016 landmark Hutley opinion also provides ample evidence as to why company directors all over the world not only need to be aware of their firms’ contribution to climate change – it is just as important to assess and disclose their potential climate risks in a transparent manner. It is therefore vital to ensure that future business plans are in line with the Paris Agreement and to also anticipate and prepare for climate change impacts, both in terms of risks and opportunities. The voluntary TCFD recommendations provide a framework for both corporates and financial institutions for assessing and disclosing climate risks and opportunities, and mandated disclosures are on the horizon. 


Acclimatise – experts in physical risk assessment and disclosures

Acclimatise has worked on physical climate risk and adaptation with corporates and financial institutions for over a decade, helping them identify and respond to physical risks and to take advantage of emerging opportunities generated by a changing climate. We have witnessed the corporate, societal and environmental benefits stemming from the promotion of resilience-building strategies.

To discuss how your organisation can meet TCFD or other disclosure requirements, please contact Laura Canevari: L.Canevari(a)acclimatise.uk.com

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