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REST fights climate risk investing lawsuit

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Retail industry superannuation fund REST has faced charges from one of its members that it has not protected his money from climate change, in a court case that could set a precent for the super industry.

Brisbane-based Mark McVeigh first filed a legal action against the trustee of the $57 billion fund, Retail Employees Superannuation Trust (REST), in 2017, arguing that it had breached its fiduciary duties owed to him by failing to consider climate change risks. 

Last year, Mr McVeigh filed a new Federal Court claim against the trustee, stating it had failed to act with “care, skill and diligence” in its investing, by not properly considering climate risk. 

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The action sought declarations that REST breached the Superannuation Industry Supervision (SIS) Act and its due diligence risk duties, with Mr McVeigh urging for the fund to avoid future misconduct. 

The case will be back before the Federal Court this month.

Mr McVeigh, who has been contributing to REST since 2013, was said to have asked for information from the fund over email in 2017: Rest’s knowledge on climate business risks as well as its opinion on climate change with its physical, transition and business risks.

He was also reported to have asked for the fund’s actions responding to climate change and its compliance with the Corporations Act and other law around climate risks.

The Corporations Act in particular states super fund beneficiaries can ask for any information they need to make an informed decision about the management and financial condition of the fund. 

REST purported to identify and provide all of the requested information, with a spokesperson saying it has “sought and remains open to meeting with Mr McVeigh to discuss his concerns and share information about REST’s approach to managing climate change risks on behalf of members.” 

But Mr McVeigh’s legal team argued the material provided did not allow Mr McVeigh to understand the fund’s investments or benefit entitlements of his super product and thus did not allow him to make an informed judgement.

The suit demanded a declaration that REST violated the Corporations Act by failing to provide the information along with an injunction requiring the fund to cough up its thinking on climate risks and countering strategies.

“I thought my superannuation funds may not be doing enough on climate change,” Mr McVeigh said.

“When I asked them for more information, they didn’t tell me much, and now they say they have given me all the information they have.”

He noted the fund “did not have a transparent plan.”

The original claim alleged REST’s trustee should have performed additional acts to reviewing its investment strategy through a climate lens, also asking REST to comply with Task Force on Climate-related Financial Disclosures (TCFD) recommendations on disclosure and risk assessment. 

At that time, Mr McVeigh was defended by Environmental Justice Australia, with the group arguing as the 25-year-old is restricted from accessing his retirement savings until 2055, climate risks are “biting now,” eroding his investments. 

Mr McVeigh is now being represented by former EJA principal lawyer David Barnden’s new firm, Equity Generation Lawyers.

“I’m concerned the fund isn’t taking climate change seriously when investing my money,” Mr McVeigh said when the case was filed.

“The world is already seeing the impacts of global warming. My money should be managed in a way that makes climate change a priority.”

REST has insisted climate change risks are factored into its investment strategy and decision-making process, as well as in the selection of its investment managers. It is also a member of the Principles of Responsible Investment (PRI) and Australian Council of Superannuation Investors.

“Mr McVeigh has so far not been willing to meet with us,” a spokesperson for the fund said.

“While this is disappointing, our door remains open.”

An example for other super funds

REST is one of Australia’s largest asset managers, with 1.9 million members and is listed in the top 150 pension funds in the world. 

Environmental Justice Australia declared a judgement would set the bar for how major asset owners should address climate change risks when managing other people’s money. 

Mr Barnden called the action an “important test case for Australia’s $2.6 trillion superannuation industry.”

“Super funds own 25 per cent of the total value of all companies listed on the ASX,” he said.

“These funds and the individuals that control them are critical to the economy’s fast and orderly transition under the Paris Agreement.”

He added REST in particular has long-term investments in property and infrastructure, as well as in public companies exposed to climate risks.

“Super trustees must consider climate risks and protect their members from the significant impacts of climates change,” Mr Barnden said.

During a court decision in January Federal Court judge Nye Perram stated: “The case appears to raise a socially significant issue about the role of superannuation trusts and trustees in the current public controversy about climate change.” 

“It is legitimate to describe the applicant’s litigation as being of a public interest nature.”

Mr Barnden has acted in other cases around climate risks. He represented two shareholders in a case against CBA, claiming the bank had inadequately disclosed climate risk.

His new company has chosen a niche as specialist climate change law firm.

 

REST fights climate risk investing lawsuit
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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