Investing in climate litigation
Climate litigation has extended beyond a focus on corporations to include claims brought against both private and public investors.
These cases might be seen as ‘reactive’ in their approach; they are particularly responding to investments that have already been made.
In terms of litigation brought against private investors, for example, the Australian Securities and Investments Commission (ASIC) has commenced two greenwashing cases in the Federal Court of Australia.
In Australian Securities and Investments Commission v Mercer Superannuation (Australia) Limited, ASIC alleges that a sustainable investment option marketed and offered by Mercer included investments in industries that the website said were excluded.
And in Australian Securities and Investments Commission v Vanguard Investments Australia Ltd, ASIC alleges that, contrary to representations, a Vanguard fund included issuers that were not researched or screened against ESG criteria and that some issuers violated these criteria.
Both of these examples involve claims relating to sustainable investment options that have already been offered to potential investors.
In terms of cases brought against public or hybrid investors, two cases led by Equity Generation Lawyers are based on failure to disclose climate change risks/impacts in relation to the Australian Government’s investment activities.
In O’Donnell v Commonwealth, the claimants allege that the Australian Government engaged in misleading and deceptive conduct by failing to disclose climate change risks in bond issue documents and on the website of the Australian Office of Financial Management.
And in Jubilee Australia Research Centre Ltd v Export Finance and Insurance Corporation & Ors, the claimants argue that Export Finance Australia and the Northern Australia Infrastructure Facility have breached their obligation to report the impact of their financing activities (including possible fossil fuel projects) on the environment.
Both of these examples involve claims relating to investment activities already undertaken by the Australian Government.
These greenwashing cases and misleading or inadequate disclosure cases brought against private and public entities are largely reactive in focus. They are based on investments that have been already untaken and (possible) breaches that have already occurred.
It is true that the litigants in these cases are likely aiming to change future investing activities, by focusing on past behaviour. However, despite this, it is important to recognise the limits of litigation i.e. it is often invoked to remedy situations where something has already gone wrong.
It is therefore important that actions are taken across all areas of activity, including amending legal frameworks, to ensure that barriers to climate friendly investment are removed and that incentives exist to shift finance towards a net zero aligned future.