O’Donnell v. Commonwealth

Equity Generation Lawyers filed a lawsuit in the Federal Court on behalf of Kathleen (Katta) O'Donnell against the Australian government. The lawsuit alleges that the government breached its duty of disclosure and misled and deceived investors in failing to disclose such risks.

Background
Katta O'Donnell, along with retail investors, pension funds, central banks, insurers, and hedge funds, invested more than A$800 billion in Australian sovereign bonds. In July 2020, O'Donnell filed a class-action suit against the Commonwealth of Australia, the Secretary of the Department of the Treasury, and the CEO of the Australian Office of Financial Management for violating their government duties when issuing bonds. The plaintiff argues that Australia's stake and reputation within international markets will be affected by the government's response to climate change, meaning that the bonds face the same risks. Therefore, the plaintiffs say the associated risks of climate change should have been disclosed to investors when they were not. O'Donnell's legal argument has two parts:
 * 1) The defendants violated the Australian Securities and Investments Commission Act 2001 because their failure to disclose information related to climate change risks was "misleading or deceptive"
 * 2) The defendants also violated the Public Governance, Performance, and Accountability Act 2013 because by not disclosing the risk, they failed to "exercise their powers, perform their functions, and discharge their duties, with reasonable care and diligence"

In her claim, O'Donnell mentions the Paris Agreement and the goal of limiting global warming to 1.5 degrees Celcius. The plaintiff is asking the Court to declare breach of the law and using retail holdings to remedy that breach, but she is not seeking a financial settlement.

Relevant Law and Principles

 * Australian Securities and Investments Commission Act 2001
 * Section 12DA(1)
 * Public Governance, Performancy, and Accountability Act 2013
 * Section 25(1)
 * Paris Agreement

Status
In the first hearings in the Federal Court of Australia, the government argued that O'Donnell had no standing as she hadn't been personally deceived by the defendants, a fact that her legal team doesn't dispute. The case is currently pending.

Takeaways
The O'Donnell case is the first time an investment disclosure case related to climate change has been brought against a sovereign government, but it follows a general trend of global climate litigation. In 2016, the head of the Australian Bar Association wrote in an opinion that companies must consider relevant climate change risks and disclose those risks or they may be held liable in court. Then, in 2019, a follow-up opinion urged for directors to evaluate climate risks and increased exposure to litigation. The case will set precedent for the nature of public entities' duties to consider climate change and how it will relate to corporate duties.

Links

 * Complaint
 * 2016, Australian Bar Association Opinion on Climate Change and Directors' Duties
 * Equity Generation Lawyers