Rechtsanwalt, Legal Director
Out-Law News 1 min. read
12 Sep 2022, 2:45 pm
Australian fossil fuel companies are seen as “soft targets” for climate litigation, according to one legal expert, after super fund UniSuper was challenged over its investments in oil and gas provider Santos.
In a letter sent to UniSuper’s chief executive, directors and trustees last month, the Environmental Defenders Office (EDO) said the company’s AUS$163.8 million stake in Santos “may amount to a breach of the law”.
The letter alleged that the investment fund had failed to adequately examine the net zero and emissions reductions claims made by Santos, which it said was expanding its oil and gas production contrary to the climate goals of the Paris Agreement.
Writing on behalf of UniSuper member Rachel Davies, a research fellow at the Australian Catholic University, the EDO said the super fund should divest from Santos avoid significant liability risks arising from its potential breach of duties. It added that Davies reserves the right to raise the issue with regulators or commence legal proceedings.
Jeremy King of Pinsent Masons said: “Australia seems to be a happy hunting ground for greenwashing claims and other climate litigation. One reason for this could be that successive federal governments – before the current one – have not enacted net zero and other climate ambitions in legislation, leaving everything to the common law.”
King added: “Climate activists see oil, gas, coal and traditional energy companies as soft targets. But there is greater merit in working with those companies on their path to decarbonisation – and evolving into more sustainable corporations – than embroiling them in litigation. Sustainable finance is a useful conduit for this, as it also enables banks and financial institutions to contribute to the national net zero trajectory.”
King said that while industry super funds have an “overriding fiduciary obligation” to their members and need to deliver “hurdle-rate financial returns”, there is “nothing stopping a super fund from also taking environmental, social and governance (ESG) issues into account when investing member contributions. He said: “ESG in Australia has moved beyond simply ‘screening out bad stuff’ to now ‘screening in good stuff’. Any private or public corporation that has embarked on its journey of decarbonisation should be encouraged to attract capital that supports that journey.”
“If industry super funds could lend alongside banks and other financial institutions and adopt sustainable financing methods being championed by the Asia Pacific Loan Markets Association, they could potentially reduce the risk of these types of greenwashing claims. Independent measurement and verification of corporations’ ESG credentials and achievements – ubiquitous in the sustainable finance universe – would assist in this regard,” King added.
According to the EDO’s letter, UniSuper has until 16 September 2022 to reply and explain how its investment in Santos does not represent a breach of the law.
Rechtsanwalt, Legal Director