Guest essay by Eric Worrall
An University of New South Wales associate professor of law ecologist is suing his own retirement fund, over a claim the fund managers are failing to address climate risk.
Climate change: Could your super fund be liable?
Twitter Facebook LinkedIn12 FEB 2020
DAWN LO, BEN KNIGHTIs the next shake-up to Australia’s superannuation industry just around the corner?
Can you sue your super fund for financial loss incurred as a result of climate change? This controversial question will be addressed in a landmark court case in July this year and will place Australia’s estimated $3-trillion super industry under the microscope.
Has your super fund failed to protect your retirement savings from climate change risks?
The case in question centres around a 24-year-old ecologist who has taken his trustee to court, claiming the financial loss associated with climate change was not factored into his retirement investment. The outcome of the case could set a precedent for whether super funds must take climate change risks into account.
UNSW Law’s Associate Professor Scott Donald, Director of The Centre for Law, Markets and Regulations (CLMR) – a joint initiative of the Faculty of Law and UNSW Business School – says the risk of climate change cannot be avoided and is already impacting investment returns.
“Climate risk is here – it is affecting the valuation of assets and also the investment opportunity set now. Sticking one’s head in the proverbial sand is not a viable investment option.”
Associate Professor Donald says the legal responsibility of super funds could extend to protecting against the risks imposed by climate change.
“The law is clear – super fund trustees have an explicit duty to pursue the best financial interests of members. So, to the extent that climate change poses financial risks, the duty is already there. The problem is one of priority. Unfortunately, not all trustees see action on climate risk as a priority, at least not for their fund.”
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Read more: https://newsroom.unsw.edu.au/news/business-law/climate-change-could-your-super-fund-be-liable
Surely the obvious answer is, if you are not happy with the risk management policies of your current pension fund, shop around for a new fund, or start your own; Under Australian law running your own own “self managed fund” is an entirely viable proposition.
There are funds which invest in fashionable green business ventures, though green investments have their own risks. The 2011 collapse of Solyndra obliterated at least $187 million of Tranche “E” investment fund assets, including money from Richard Branson’s Virgin Green Fund, which eventually shut down in 2014.
Spain’s abrupt cancellation of billions of dollars worth of renewable subsidies in 2012 reminded green fund managers who invest in businesses which depend on government subsidies, that governments can arbitrarily rip up renewable subsidy agreements without notice or compensation.
What about investing in China? China dominates manufacturing of solar panels and wind turbine components, so surely there should be plenty of opportunities to invest in profitable green Chinese manufacturing enterprises?
Not so fast. Communist China’s sovereign risk profile has just taken a major dive. Two key Chinese manufacturing cities in the last few days passed laws allowing city authorities to arbitrarily seize private assets, to help combat the Corona Virus.
The one thing fund managers truly fear is the possibility a corrupt government might seize their fund’s assets. Given China’s horrendous levels of corruption, it is likely only a matter of time before a corrupt Communist official uses those new seizure laws to enrich themselves at the expense of Western fund managers and investors. Expropriated owners are supposed to receive fair compensation, but the level of compensation will be determined by the officials exercising the new seizure laws.
Even if the Corona virus is rapidly defeated, and we all hope for the best, this new power to arbitrarily seize assets will be a reminder to green investors and others that property rights are subject to the whim of government officials in Communist China.
Correction (EW): Commiebob points out I misread the article. The plaintiff is ecologist Mark McVeigh, not a UNSW law professor.
As there is no such thing as man-made climate change the ‘climate change risk’ (from natural change) still is what it always was and has already been taken into account. That should be the case for the defense.
The news about new misappropriation ‘laws’ in China should make any investor make a run for the exit. China is going to do an Argentina big time and its economy will go down the plughole.
Thats funny. I did the reverse. I fund my Super Fund (I guess Americans would call them 401k managers) was remixing what its investment options meant and that some of my choices were now funding “renewables” I immediately moved my money away to areas focussed on returns , rather than feels.
Excellent.
From the article: “Can you sue your super fund for financial loss incurred as a result of [Human-caused] climate change?”
Well, first you would have to prove that human-caused climate change exists. Noone in the last 40 years has been able to prove that but you go right ahead and try it.
You should be happy I’m not the judge that hears your case because evidence of human-caused climate change would be the first thing I would require in order for your case to go forward.
Agreed. The problem, of course, is judges who will accept AGW as factual without evidence – THAT is the danger, and that is the precise reason these SOTE green pressure groups keep trying – so they can get “legal decisions” in their favor to leverage more useless lawsuits.
“The problem, of course, is judges who will accept AGW as factual without evidence – THAT is the danger”
You’re right. That’s a problem with lots of groups: politicians, scientists, uninformed citizens. Much too trusting of authority.
I’m a member of the Unisuper Fund that he is suing. This very well managed fund offers a large number of alternative (sub) funds to its members including several sustainable funds which have no fossil fuel investments, and which right now are outperforming the default fund (not because they are sustainable but because these particular options are run by very knowledgeable Unisuper in-house managers). So there is absolutely no need for him to set up a self managed fund. He would be hard pressed to argue that Unisuper does not already offer him the option of managing any climate risks, as he sees them, within the fund.
He’s 24? One day he’ll grow up.
This clown is proof that “too stupid to live” really should be a valid diagnosis.
Hmm. A number of US democrat politicians are proposing “net worth” taxes, presumably including retirement assets. Can I sue my retirement fund because they aren’t taking action to protect me from those risks?
This idiot is also ignoring that the Australian market is at almost record levels at least before the coronavirus scare has hit. He could of course set up his own self managed super fund, something the judge should point out before any decision that destroys the value of everyone else in that fund’s savings. This lawfare nonsense has got to stop. Perhaps we in Oz should link the judges pension plan to what ever decision they make thereby ensuring that they will at least have thought seriously about their decision.
“…new seizure laws to….” Oh, how true. It’s one of the reasons the progressives socialist love the China’s model of governing. Their “Tax on Assets” paid for with after taxed money will never fly. Amendment XVI; the Federal Government can only “tax” income. States may get away with more “property taxes”. So the question how could the Feds increase revenue? They go after plans like 401Ks and IRAs type programs. Then they phase it in like they did with income tax. “Only the 1% will pay income tax”. How long did that last?
“The law is clear – super fund trustees have an explicit duty to pursue the best financial interests of members.”
That actually applies to all trustees to just those of superfunds.
“So, to the extent that climate change poses financial risks, the duty is already there. The problem is one of priority.”
But pity the poor trustees who switch out of solid, long-term investments because they might not perform well should climate actually warm significantly, as all the so-far failed models suggest, only to find that temperatures do not follow the trajectory forecast by the modellers.
A real catch 22 situation.
Most states shy away from expropriation.
It has been shown that compensated people still process, for generations.
Thei’ll find lawyers with experience in such processes, thei’ll find lenders, because processes for generations paralyze the bureaucracy and thus cause high additional costs:
Expropriation is not the state’s “what ever you want” program.
Most states shy away from expropriation.
It has been shown that compensated people still process, for generations.
Thei’ll find lawyers with experience in such processes, thei’ll find lenders, because processes for generations paralyze the bureaucracy and thus cause high additional costs:
Expropriation ain’t the state’s “will have” programs.
Something like that spans generations and leads to murder and manslaughter:
https://www.google.com/search?q=right-of-way&oq=right-of-way&aqs=chrome.