Government concedes climate change may impact bonds

The Australian government has conceded climate change is a systemic risk which may affect the value of its bonds in a statement to end a lawsuit over claims investors have been misled.

Katta O’Donnell began a class action against the Commonwealth three years ago, seeking a declaration by the Federal Court that there had been breaches of disclosure required by financial legislation.

If granted, she also sought an injunction restraining the Commonwealth from promoting bonds until it complied with disclosure.

But under terms of a proposed settlement, to go before the court for approval in October, Ms O’Donnell has agreed to drop the legal action without seeking costs, in exchange for a public statement.

That statement acknowledges climate change poses significant risks and opportunities for Australia’s economy, and achieving emissions reductions commitments will require significant government and private sector investment.

The agreed document refers to uncertainty around the magnitude and timing of the physical impacts of climate change, as well as the fiscal impacts.

“As a consequence, there is uncertainty about whether the fiscal impacts of climate change may affect (if at all) the value of Commonwealth Government Securities (also known as Australian Government Bonds or AGBs) and, in turn, eAGBs,” the document says, further referring to exchange-traded bonds.

Ms O’Donnell welcomed the settlement, saying it was the first time a country with a AAA credit rating acknowledged climate change was a systemic risk when talking about risks to government bonds.

“When I purchased these bonds as a 23-year-old in 2020 the government did not mention climate change,” she said.

“This was remarkable given that my bonds mature in 2050 and by that time Australia will be facing increasingly serious climate impacts.”

Her lawyer, Clare Schuster, said the settlement was an important step in a broader contextual shift.

Since the case was filed the government has better incorporated climate change into legislation, policy and its budget, and through the settlement has committed to providing better disclosure for investors, she said.

In the statement, which followed mediation between the parties, the government notes it is establishing a sovereign green bonds program to increase transparency and credibility in the growing sustainable finance market.

The Commonwealth acknowledges investors are making commitments to reducing emissions associated with their investment portfolios.

“The Commonwealth will continue to engage with asset owners and relevant stakeholders to ensure that investors are informed as to the Commonwealth’s policy settings and actions in relation to the risks and opportunities posed by climate change,” the statement says.


Karen Sweeney
(Australian Associated Press)


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Categories: Legal