SEI in the Media: Tim Stephens Discusses Super Funds Facing Scrutiny Over Climate Risk

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SEI Key Researcher, Tim Stephens was featured in an article for the Australian Banking and Finance, AB+F, published by RFi Group titled ‘Super funds face scrutiny over climate risk.‘ The article written by Christine St Anne explores the question of financial stability in the face of climate change and highlights that climate risks can no longer be seen as non-financial problems. The article in its entirety is below.

Under recommendations from the Financial Stability Board’s Task Force on Climate-related Disclosures (TCFD), led by Bank of England Governor Mark Carney, businesses need to disclose climate-related financial risks in mainstream financial statements.

The recommendations follow recent remarks made in February by Australian Prudential Regulation Authority executive board member Geoff Summerhayes.

Summerhayes said that climate risks “have often been seen as future or non-financial problems”, but made it clear “that this is no longer the case”.

Banks chiefs have also publicly acknowledged that disclosure around climate risks need to be addressed, particularly in the area of their lending books.

According to environment finance group Market Forces, superannuation funds face the same disclosure requirements but according to its analysis of 100 of the largest superannuation funds, 82 per cent of these funds have provided inadequate or no tangible evidence of considering climate risk in their investment portfolio.

Legal action

To accompany the analysis, Market Forces commissioned a memorandum of opinion from Noel Hutley SC and James Mack to assess the extent to which superannuation fund trustees are responsible for reporting on climate risk. The opinion stated that: “climate change risks can and should be considered by trustee directors”.

According to Hutley and Mack, this failure in disclosure puts trustee directors at risk of breaching their duty to members and, as such, they are vulnerable to legal action.

“Such comments from a top silk like Noel Hutley should really put this issue at the top of minds for superannuation fund directors particularly given his warnings on personal liability,” Tim Stephens, an international environmental law expert at the University of Sydney told AB+F.

Stephens acknowledged the public comments made by bank executives show that banks are moving to address financial risk and disclosure issues from climate change and said it was important that superannuation funds also publicly acknowledged their actions in this area.

He also noted the growing calls by regulators – such as the comments made by Summerhayes – on the issue, adding that Carney had also made a number of public statements.

To access the original article, click here.

Professor Tim Stephens is Professor of International Law and ARC Future Fellow, University of Sydney Law School. His ARC research is examining the implications of the Anthropocene for international environmental law.