A 25-year-old took on a $57 billion super fund over climate change and won. Experts see the case as evidence of ‘which way the wind is blowing’.

Mark McVeigh took on Rest Super over climate change.
  • Australian Mark McVeigh settled with Rest Super out of court this week after a two-year battle over its climate change strategy.
  • The $57 billion fund publicly committed to a zero carbon footprint by 2050 as a result, as well as making a range of other major pledges.
  • The case highlights growing recognition of the responsibility of funds and companies to manage climate risk, and the potential legal consequences they face for failure to do so.
  • Visit Business Insider Australia’s homepage for more stories.

In what can only be described as a David and Goliath battle, an Australian millennial has managed to force a $57 billion superannuation giant’s hand.

This week, 25-year-old Mark McVeigh settled his fight with Rest Super in an 11th-hour agreement which prevented the two parties having to duke it out in court.

McVeigh had taken up the case against Rest in 2018, alleging that the super fund hadn’t acted in his best interests by not doing enough to mitigate the financial risks of climate change.

The details surrounding their eventual truce are unknown, having not gone to trial, but it would appear Rest has heeded the warning.

In a public statement, it pledged for the first time to have a zero carbon footprint by 2050.

“Rest agrees with Mr McVeigh to continue to develop its management processes for dealing with the financial risks of climate change on behalf of its members.”

The super fund said it “acknowledges that climate change could lead to catastrophic economic and social consequences and is an important concern of Rest’s members”.

As part of its efforts, Rest pledged to publicly disclose portfolio holdings, consider a minimum of two climate change scenarios when setting investment strategy and align itself with the Paris Agreement.

Considering Australia’s superannuation industry controls more than $3 trillion of workers’ savings, it marks a tremendous victory for both members and Australians more broadly.

“What is critical here are Rest’s expectations regarding the companies that it invests in, in their ability to assess and disclose their exposure to climate change risk, both physical and transitional risks,” Brendan Bateman, partner at major law firm Clayton Utz, told Business Insider Australia.

Specialising in environmental law, Bateman says Rest’s pledge will have far-reaching consequences, as it joins the 20% of super funds committed to net-zero emissions.

“So it’s almost the whole supply chain that’s now being directed by a significant investor. That will drive further change within the Australian economy and Australian business.”

Super funds know ‘which way the wind is blowing’

Had McVeigh’s case seen the inside of a courtroom, it would have been the first major legal test of the responsibility of businesses to act in the face of climate change.

The fact it ultimately didn’t, however, doesn’t diminish the significance of the settlement, according to University of Melbourne law professor Jacqueline Peel.

“I think super funds will be looking very closely at that settlement in formulating what they will do on climate change,” Peel told Business Insider Australia.

Peel, who specialises in climate litigation, said the strong statement from Rest indicates it knew “which way the wind was blowing”.

“It does look like they’ve capitulated and decided that this was going to be a better result for them, rather than pursuing the litigation and having a court find that their legal duties also require action,” she said.

Directors could be held responsible for climate inaction

The Rest case clearly goes to something beyond a single super fund and one disgruntled member.

For years, there has been a view that company directors and fund managers alike could be culpable for failing to protect shareholders and mitigate the impact of a known risk.

There’s a well-known legal opinion in Australia, albeit not a judgement, formulated by two prominent commercial silks, Noel Hutley and Sebastian Hartford Davis, to that very effect.

In their own words, “it is increasingly difficult in our view for directors of companies of scale to pretend that climate change will not intersect with the interests of their firms,” the two write, noting the risk of litigation is rising “exponentially”.

“They describe corporate litigation against directors for failing to manage climate risk as being just a matter of time,” Peel said.

The prospect of legal action has understandably made boards sit up and take notice — and they’re not the only ones.

“Over the last 18 to 24 months, almost all the important regulators in Australia has come out and said that climate change is a first-order risk, and that businesses and companies need to be thinking about how they assess it,” Bateman said.

“It is very much a case of everyone’s on notice.”

The tide has turned

While the dangers of ignoring climate change are salient, it’s just one side of the coin when it comes to Australia’s energy transition.

“People often lose sight of the opportunities that are going arise,” Bateman said.

“It’s those who consider climate-related risks that are more likely to be in a position where they can identify and seize new opportunities, create new markets, adapt to new technology, and therefore get ahead of their competitors.”

While companies like Tesla have come to embody that creed, the same goes for nations. A new Deloitte report claims that a low-emission economy could add an extra $680 billion to the Australian economy. Meanwhile Think tank Beyond Zero Emissions says there are 1.8 million jobs to be created as part of its clean energy plan, backed by Atlassian founder Mike-Cannon Brookes.

The upside of this is that even in Australia, where successive governments have failed on climate action, the smart money understands the state of play, according to Bateman.

“The government can complain about ANZ making a statement about its net zero commitment, [and] the National Party can critique them for ‘virtue signalling’ all they want but the bottom line is, ANZ realised that this is where the market and investment is going because it’s all about assessing risk,” he said.

“How do we manage that risk? You do it by moving and decreasing our investment exposure to emission-intensive assets.”

Those few who fail to do so might just find themselves in court.