Published on October 1st, 2020 | by Luke Fitzpatrick


Climate Change: Student Sues Government Over Investment Risks

If the coronavirus has shaken up the world’s economies and societies, its effects might be just a small hint of the level of disruption another looming disaster could bring. Scientists say the age of climate change is already upon Earth and in the absence of wartime-like shifts, the order of magnitude could be much higher.

The future looks uncertain, especially for younger generations. Indeed, it’s the youth who have been the plaintiffs in different legal actions around the world. Most recently in Australia, a university student has commenced litigation against the Australian government, specifically for the failure to disclose investment-related risks.

Image Credit: Unsplash

At stake: financial risk

Katta O’Donnell is the head litigant in the class-action lawsuit, and her claim is the Commonwealth is neglecting to disclose climate-change-related exposures to her portfolio, which include superannuation and other ostensibly safe investments. As such, she is arguing the authorities have a duty to divulge the potential impact global warming has on government bonds (Commonwealth Government Securities or CGS).

Described by observers as a major climate-change case, O’Donnell’s case was filed in the Federal Court. It specifically assigns responsibility and blame to the Commonwealth, the secretary to the Department of Treasury, and the chief executive of the Australian Office of Financial Management. The litigant isn’t seeking damages but acknowledgment and disclosure through a declaration that there has been a breach of duty. She’s also asking for an injunction to stop the promotion of CGSs until the disclosure information is updated.

Protecting the future

Antonia Ko, a 23-year-old law student and zero waste activist, explains she was motivated by a desire to “protect her future.” It was watching the 2019-20 bushfires that made her start worrying about her economic future. She hopes the legal action will help drive change in the country’s climate-change strategy, stop the authorities from keeping people in the dark and raise awareness of the dangers for everyone. She says her young age is one of the reasons she’s pursuing the issue and notes a hotter environment poses risks to her money as well as to “the whole of society and the Australian economy.”

A world-first

According to experts, the trial could open the floodgates to other cases that also seek to link an overheated planet to these economic hazards. The action is the first of its kind in the sense a national governing body has been sued for insufficient openness on threats to investment options. For Australia, such exposure might be higher than in other areas because of the drought and bushfires. Professor Jaqueline Peel at the University of Melbourne suggests the country is a hotspot for such legal actions, and only the US has had more cases.

For context, regulator APRA observed in 2017 that global warming was not only a “foreseeable” risk but also “material and actionable” presently. APRA is already collaborating with ASIC, the corporate regulator, and the Reserve Bank of Australia to make sure listed companies are strategizing on the dangers and disclosing it to shareholders. In the face of a looming disaster, the authorities’ response to COVID-19 shows how quickly it can act to protect people against hardship, but longer-term issues such as those highlighted by this trial appear to be more challenging.

A majority of Aussies hold CGSs through mandatory superannuation. Katta owns some independent of her super as well. These products are usually valued as one of the most secure and stable investing options, but they can decline in value if investors are concerned they can’t be repaid. Although regulations require organizations issuing financial products to make known how global heating could impact shareholders, the government does not disclose these potential impacts when it comes to its own products. In addition to possibly opening the way for other trials, this case could transform how super funds and other entities invest.

The era of human-created weather

The Anthropocene, or the era of human-created weather, is already upon human civilization. In the coming year, these types of trials will likely become more common. Whilst the litigants might have little to gain personally, such highly publicized trials could force greater transparency and create more awareness about the very real hazards posed to retirement savings and other supposedly safe asset categories. Beyond that, they could compel a change in policy on related issues like green energy and carbon emissions. What’s worth keeping in mind is this: even if you can manage to get by in retirement after a big drop in your nest egg, no one can keep living on an uninhabitable planet.

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About the Author

Luke Fitzpatrick has been published in Forbes, Yahoo News, and Influencive. He is also a guest lecturer at the University of Sydney, lecturing in Cross-Cultural Management and the Pre-MBA Program. You can connect with him on LinkedIn.

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