REST Super settles with member Mark McVeigh over climate risks

The super fund has settled with a young member who alleged the trustee did not act in his best interest by not disclosing its climate strategy.

REST Super said its portfolio will be aligned to reach net zero emissions by 2050.

REST Super has settled with a 25-year-old member who sued the $57bn industry superannuation fund for failing to provide information related to climate change business risks as well as any plans made to address them.

The fund, which looks after the retirement savings of retail employees, has also agreed to a target of net zero emissions by 2050.

Mark McVeigh launched the action in the federal court in 2018, claiming the trustee had violated the Corporations Act 2001 by not disclosing the risks of climate change to member returns, and later amended the action to allege that the fund did not act in his best interest or with the required care, skill and diligence in its failure to disclose.

REST settled with Mr McVeigh ahead of a trial that was scheduled for Monday, stating: “climate change is a material, direct and current financial risk to the superannuation fund”, and “REST, as a superannuation trustee, considers that it is important to actively identify and manage these issues”.

The super fund also said its portfolio will be aligned to reach net zero emissions by 2050, reported against the Task Force on Climate-related Financial Disclosures, a not-for-profit organisation that aims to standardise corporate disclosure of climate change risks in financial reporting.

REST said this will involve a full disclosure of its entire portfolio holdings, scenario analysis, strategic asset allocation and lobbying investee companies to comply with the Paris Agreement. It will also ensure investment managers comply with the net-zero vision.

“Consistent with the Task Force on Climate-related Financial Disclosures (TCFD), REST acknowledges that climate change could lead to catastrophic economic and social consequences and is an important concern of REST’s members,” the superannuation fund said on Monday.

“The superannuation industry is a cornerstone of the Australian economy — an economy that is exposed to the financial, physical and transition impacts associated with climate change.

“As part of this, REST will take further steps to ensure that investment managers take active steps to consider, measure and manage financial risks posed by climate change and other relevant ESG risks.

“As the trustee, REST requires that compliance with these efforts be reported back to it and will use a variety of mechanisms to assess and, if necessary, take steps to improve, the compliance of its investment managers”

Mr McVeigh said he hoped the case would influence the approach of the broader super fund industry to the risks of climate change.

“Today’s settlement gives me, and REST’s almost two million members, the reassurance that we need to know that our retirement savings will be invested responsibly in the face of the climate crisis,” he said.

“This case is a groundbreaking recognition of the material financial risk that climate change poses to the economy and society, and the role that superfunds have in managing it.

“I hope it will go some way to catalysing the Australian super fund industry, which, with almost three trillion dollars under management, has the potential to make or break our climate response.”

David Barnden, principal and director of Equity Generation Lawyers who represented Mr McVeigh in the case, said the settlement should be precedent-setting.

“This marks the first time a major Australian super fund has agreed to settle litigation about the material financial risk of climate change and what needs to be done to protect members,” he said.

“It is clear that the buck stops with board members, and managing climate risk cannot be delegated away.

“This outcome should represent a significant shift in the market’s willingness to tackle climate risk — a shift which should set a clear precedent for the industry in Australia, and also pension funds around the world.”