It all began as a spur of inspiration. Katta O’Donnell, now in her fifth year of law studies at La Trobe University, was cerebrally tickled by a lecture on climate risk by David Barnden of Equity Generation Lawyers. Minds met; ideas exchanged. ‘It’s time the government told the public about the impact climate change will have on our future and the economy,’ O’Donnell insisted.
On July 22, the adventurous pupil filed an action in the Federal Court in Victoria hoping to make good her promise to put the government on trial for ‘misconduct’. The action notes that, ‘At all material times there has existed a significant likelihood that the climate is changing, and will continue to change, as the result of anthropogenic influences.’ Australia was ‘materially exposed and susceptible’ to the risks posed by climate change.
O’Donnell seeks to subject the government to trial via the mechanism of sovereign bonds, deemed some of the safest forms of investments. These involve investments made to governments at a fixed interest rate for a set period and typically form the bedrock of Australia’s superannuation funds. Such investors, she argues, need to be informed by the government, to an adequate standard of legal care, about climate change risks.
The action contends that considerations of climate change risk ‘can have a serious material impact on a decision by an investor to invest in Sovereign bonds and on the value of Sovereign bonds.’ In lending money to the government, investors were entitled to be appraised of these risks, being ‘material to [their] decision to trade in exchange-Australian government bonds (e-AGBs)’. Not doing so potentially imperilled the economy and constitutes misleading and deceptive conduct.
O’Donnell analogises that conduct of care with those of company directors. An assortment of legal opinions in Australia have previously suggested that company directors ‘can and in some cases should be considering the impact on their business of climate change risks, to the extent they intersect with the firm.’ In 2019, a legal opinion drafted by Noel Hutley SC and Sebastian Hartford Davis noted the ‘developments in the state of scientific knowledge’, an increased number of interventions by Australian regulators and the greater concern shown by investors in climate change issues. ‘In our opinion, these matters elevate the standard of care that will be expected of a reasonable investor.’
This action is singular and optimistic. Australian judges will find wading into the field of climate change science vis-à-vis