ESG Aus and NZ Update

Australian and New Zealand ESG Updates

Australian student sues Australia

Twenty-three-year-old Australian fifth-year La Trobe University law student, Katta O'Donnell, has filed a claim with the Federal Court alleging disclosures on climate risk in government bonds is not appropriate. The world-first lawsuit is for the government allegedly failing to make climate change-related risks clear to investors. O’Donnell is invested in government bonds.

The statement says Australia is ‘materially exposed and susceptible’ to climate change risks. The statement goes on to say that the country’s economy and national reputation in international financial markets will be affected by the government’s response to climate change. These risks are important when an investor decides to trade in government bonds and investors should be entitled to be informed of the risks.

O’Donnell is seeking a declaration that the government breached its duty of disclosure and an injunction that will put a hold on promoting government bonds until it complies.

Government bonds are an investment whereby an investor lends money to the government, with repayments including interest.

While certainly not the first of its kind, it is the only case of its kind that specifically targets the debt issued by a soverign nation. The case highlights the possible disparity between Australian regulatory actions for carbon risk disclosure in investors, with the government’s own actions on their issued products.

Australia does not have a great climate change risk record, which has been flagged by investors. In November 2019 Sweden’s central bank decided to divest securities issue by two Australian States. The Australian government is not famous for their forward-thinking on carbon emissions, with climate change inaction proving a sore point for investors. Australia ranks very poorly on the ISS ESG Country Rating, despite being very exposed to climate risk.

First State Super to divest coal holdings from October

First State Super is selling off its thermal coal holdings and has promised to reduce emissions in its listed equities portfolio by at least 30 per cent by 2023. Any company that derives more than 10 per cent of its revenue from thermal coal mining is out.

The Australian equity portfolio currently holds big mining companies such as BHP, Newcrest, Rio Tinto and Woodside, with some miners already divesting themselves from thermal coal or are partway to achieving that goal, such as Rio Tinto and BHP respectively.