An investor accusing the federal government of failing to disclose climate risks connected to government bonds risks devaluing the investment, lawyers have argued.
Kathleen “Katta” O'Donnell is suing the Commonwealth, accusing it of failing to disclose any information about Australia's climate risks to investors who acquire government bonds.
The class action alleges climate change and its associated risks will likely have a material impact on Australia's standing as an issuer of sovereign bonds and on the market value of those bonds.
Ms O'Donnell wants climate change associated risks disclosed to retail investors like herself.
She is seeking a declaration by the court that the Commonwealth breached its duties of disclosure in financial legislation, including the ASIC Act.
If that's granted, she wants an injunction restraining the Commonwealth from promoting bonds until it complies with the duty of disclosure.
Michael Hodges, representing the Commonwealth, said Ms O'Donnell's case involved “reams of allegations about how terrible Australia is” but made no claims about the terms of the bonds she owns, including its face value, maturity dates or redemption value.
“The inference is … she acquired these bonds and continues to hold them for the purpose of them being the trigger for these proceedings,” he said.
“And so she doesn't have any interest in relation to the outcome or the declaration, other than seeking to bring this pseudo-climate change class action.”
Mr Hodges said the risk for anyone else joining the case was that their holdings could be devalued as a result of their own actions.
He's seeking to strike out parts of Ms O'Donnell's application in the Federal Court, arguing it's deficient.
Ms O'Donnell has claimed she and other investors are not able to equip themselves with information or resources necessary to assess the nature or extent of the relevant risk, and that the Commonwealth is uniquely positioned to assess that risk.
Mr Hodges said while outside of the legal case it was not her job to identify the risks, it was her responsibility where she has argued there's a failure to disclose a material risk.
“She has to plead a fundamental material fact, which is what that risk is,” he said.
Ron Merkel QC, representing Ms O'Donnell, disputed that, saying there was no basis for a claim that the case would devalue the bonds.
He said it remained a hypothetical and while there might be information which comes out that devalues the bonds, it also might increase their value if it's determined Australia's climate risks are lower than those in other places.
The action is being brought by the same law firm that represented eight teens in their successful bid for a declaration that Environment Minister Sussan Ley has a duty of care to protect children from future personal injury caused by climate change.
Ms Ley is appealing that decision.