PRI membership and TCFD recommendations now part of Australian super fund climate test case

Australian super fund REST will have to disclose documentation about its membership of the Principles for Responsible Investment (PRI) and its stance on the Task Force on Climate-related Financial Disclosures (TCFD) as part of the landmark climate risk lawsuit brought against it.

The Australian federal court order, which was published this week, is the latest development in the case put forward in 2018 by REST member Mark McVeigh, who claims that the A$51bn (€31bn) fund has breached its fiduciary duties on climate risk.

It requests that REST, an industry fund with 2m members, provide “documents evidencing consideration and review by the Board and Investment Committee” of both the PRI and TCFD, including any “external advice” the fund took. The PRI declined to comment on the case.  

Among the list of documents to be disclosed by REST, which were agreed upon between the parties, include its policies on climate change, risk management and stress testing.

"It shows that trustees have to approach this in a really robust manner and document it clearly and make sure that they have it integrated very strongly into their governance processes" – ClientEarth

Daniel Wiseman, a lawyer at environmental law firm ClientEarth, which is not involved in the case, described the order as “really important”, one that gives a “really interesting indication of the matters that are likely to be in court at the litigation going forward”.

Even at this early stage, he said, the order shows the “level of detail and sorts of information they [REST] will be expected to produce and that has implications for funds and their advisors”.

A key focus of the order is on advisors, with the phrase “documents evidencing external advice” appearing multiple times throughout the document. 

Though the trial is not expected to take place until July, pension funds and their advisors should already start to draw inferences, Wiseman said.

“It is very interesting that these are the issues that are being looked at and I think it is a really strong indication for other superannuation funds in Australia, and similarly situated funds in other countries, of the types of issues the court might look at on whether trustees have discharged their duties.”

“It shows that trustees have to approach this in a really robust manner and document it clearly and make sure that they have it integrated very strongly into their governance processes”, he added. 

Earlier this year, REST published a climate change position statement on its website in which it announced that it was preparing to measure the carbon footprint of its equity portfolio and that it was “continually refining and improving the way we measure, monitor and report on climate change risks across our investments”.

The court order comes in the same week that Australia, under an unprecedented blanket of wildfire smoke and ash, experiences record temperatures.