Planned climate legal case against pension fund launches with public campaign

Law firm will examine whether scheme members can sue funds for breaching legal duties over financial implications of climate change.

A planned legal test case against a UK pension fund alleging that it is breaching its fiduciary duty by ignoring the potential impacts of climate change on its investments has been delayed but will become a longer public campaign to examine the legal duties of funds and whether scheme members might sue them. In February, RI reported that the potentially groundbreaking lawsuit would target one of the laggard pension funds in the UK country ranking of the Asset Owner Disclosure Project (AODP), the not-for-profit group that evaluates pension scheme management of climate change risks and opportunities. Sources had informed RI that the legal case was being prepared, but say a lawsuit will take time to put together.
Today, the AODP announced that it has teamed up with ClientEarth, the London-based ‘environmental’ law firm, which counts the band Coldplay and former Roxy Music keyboard player Brian Eno amongst its high-profile supporters to launch a longer campaign, the Climate and Pensions Legal Initiative (CPLI). Back in February, sources told RI that a meeting in London of up to 40 professionals including lawyers, NGOs, climate specialists and public relations firms, were finalising details of the test case.
 The new campaign is expected to be the precursor to a case being announced.
The NGO and law firm say they will work with pension scheme members they say want to challenge their funds to fulfil “legal duties” to protect investments from the financial risks posed by climate change. Elspeth Owens, Barrister at ClientEarth said: “Climate change is a serious financial risk for investors and could have a major impact on pension savings if not proactively addressed by pension funds. Pension funds have a legal duty to assess and manage material financial risks, including climate change risks. Some pension funds are to be applauded for their positive approach to assessing and mitigating these risks. However, many funds are failing to take any steps, and the gap between the best and the worst is widening. Those funds which are falling behind may be in breach of their legal duties.”
It suggests that any eventual legal action may look to point up the differences between pension fund responses to climate change.Owens was previously a barrister at 4 Pump Court, the commercial barristers’ chambers in London, where she specialised in commercial litigation and international arbitration, with a particular focus on shipping and commodities, insurance, construction and professional negligence.
The CPLI says its work project could lead to a legal test case if some funds continue to fall below the “standards required of them”. It does not say what these standards are.
Julian Poulter, CEO of the AODP, said pension fund members had been asking it to look at legal escalation options on their behalf that could become the world’s first fiduciary case on the subject: “Every member in every fund has a right to expect their funds to carry out proper analysis on the various scenarios around climate risk, deciding either to mitigate or carry the risk. Now is the time to find out if those funds who have not done this are in breach of their duties. Such a case would be watched closely by every pension fund and every trustee in the world. It is time for trustees of laggard funds to disclose their plans for mitigating climate risks and wake up to the reality that short-term markets are not going to deal with long-term climate risks appropriately for their members”.
One large pension fund has warned that a legal test case on climate change may not be successful and might be counter-productive. Last month, RI reported that Mark Mansley, Chief Investment Officer at the £2.8bn Environment Agency Pension Fund, said the “case for responsible investment could be set back 10 years” if the case is unsuccessful. Mansley said: “I am wary of the case. The law affords enormous discretion to trustees and judges are reluctant to interfere with that discretion. The bar is set very high and claimants would have to demonstrate serious failings by trustees.”