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On July 22, 2020 a 23 year old individual led the filing of a class action lawsuit against the Australian government alleging that the government failed to disclose the material risk of climate change to investors in government bonds1. Instead of seeking damages the relief sought seeks to require the government to improve its climate change policies and also seeks an injunction to stop the government from continuing to market its bonds until the risks of climate change are disclosed.

The class action was initiated on behalf of a 23-year old student as the representative of retail investors and investors in Australia Government Bonds (“AGBs”). The claim was brought against the Australian Federal Government and also two of its officers; the Secretary to the Department of Treasury and the CEO of the Australian Office of Financial Management.

The claim alleges that the Australian government and treasury breached its duty in failing to disclose the risks of global warming and the impacts of global warming to its investors.  This is the first time such a claim has been filed against a government body and represents the first time that the risks associated with climate change have been linked to a bond market, specifically AGBs.

The risks faced by investors are alleged to have arisen due to the material climate change risks that were not disclosed in the Term Sheets and the Information Memoranda issued by the Australian Government. Such risks were identified as including:

  • Physical impacts, such as increasing temperatures and more frequent droughts and bushfires;
  • Transition impacts, including exposures to stranded assets and legal actions, and changing markets and policies; and,
  • Sovereign response and resilience to climate change, specifically those risks relating to how the government responds to climate change, including but not limited to meeting its emissions reduction targets (under the Paris Agreement), and emissions per capita requirements under the Government energy policy.

The basis of the claim is that Australia is materially exposed and susceptible to the risks identified above and that these factors that are material to an investor’s decision whether or not to purchase or trade AGBs. The claim alleges that the Government breached its disclosure obligations and engaged in misleading or deceptive conduct including:

  • Failing to meet its duty of disclosure and breaching section 12DA(1) of the ASIC Act;
  • Engaging in misleading or deceptive conduct or likely misleading or deceiving by disclosing some risk but failing to disclose material information about the climate change related risks; and,
  • Breaching its public duties by failing to disclose the risks of climate change and failing to perform their duties with reasonable care and diligence as required under section 25(1) of the Public Governance, Performance and Accountability Act 2013.

The claim seeks declarations of the breaches identified above in addition to an injunction preventing the government from promoting bonds until the Government complies with its duties of disclosure.

The claim alleges that climate change can be harmful to Australia’s fiscal position including Australia’s: gross domestic product, fiscal policy, foreign exchange rates, inflation, taxation revenue, terms of trade, international relations, and bond yields.

In 2017, the APRA, the Australian financial industry regulator stated that climate change was not only a “foreseeable” risk, but also “material and actionable now.” The APRA is working with the corporate regulator, ASIC, and the Reserve Bank of Australia to ensure that public companies examine climate risk and are disclosing such risk to investors.

This class action was filed approximately eight months following Australia’s reserve bank’s2 stability review issued a warning that climate change is exposing financial institutions and the financial system in general to risks that will increase over time if nothing is done. The reserve bank noted that Australia insurers are directly exposed to the physical effects of climate change and that inflation adjusted insurance claims for natural disasters are twice than what occurred in the prior 10 years. The review concluded that banks and other lending institutions are exposed to physical risks because climate change can result in a decline in the income or value of collateral that they are lending against.

Climate change litigation is becoming increasingly more frequent throughout the world. There are numerous cases throughout the world relying on the courts to implement changes to promote the fight against climate change. In the Netherlands (Urgenda Foundation v. The State of the Netherlands) the government was required to adopt a plan to ensure that its climate change targets were being met. Similar results were confirmed by the court in Pakistan in the case of Leghari v. Federation of Pakistan and Colombia (Decision C-03516 of February 8, 2016).

Recently in Canada, the ENJEU case relied on the Charter to allege rights to a clan and healthy environment. This case however failed at the authorization stage. The Australia class action represents an interesting development in climate change litigation throughout the world by changing the focus from one of a “right” to a clean environment and instead takes a commercial focus on the effects of climate change on investors.


1 Former NAB chief economist Rob Henderson said Australians needed to consider the impact of climate change. “Australian government bonds are significantly more exposed [to climate change] than some other countries,” Mr. Henderson said. Mr. Henderson said Australian government bonds could be impacted by physical impacts of climate change, like bushfires, which forced governments to spend money. Or they could be impacted by “reputational risks” of climate change, as investors around the world avoided ponds from polluting countries. Sweden’s central bank has already divested from Western Australian government and Queensland government bonds because of climate change. In November 2019, the deputy governor of the Swedish central bank, Martin Floden, said it was dumping those bonds, as well as bonds from the oil-rich Canadian province of Alberta. “Australia and Canada are countries that are not known for good climate work,” he said.

2 The Reserve Bank of Australia.

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