Government settles climate risk to bonds case, makes a key concession

afr.com:

The federal government was forced to acknowledge the potential risks of climate change on the value of sovereign bonds as it settled a landmark case on Monday that alleged it had misled or deceived investors, and the Federal Court judge involved said global warming would likely be “a huge drain on Commonwealth resources”.

In a three-year legal battle, bondholder and law student Katta O’Donnell, 26, pushed the Commonwealth to declare climate change risk associated with bonds and to ban the promotion and sale of bonds until such a declaration was made.

Katta O’Donnell and the Commonwealth have settled the law student’s claim that it is obliged to disclose climate risk to sovereign bonds. Josh Robenstone

The government maintained that it was not obliged to disclose climate change risk to sovereign bondholders, despite imposing similar duties on private companies and admitting it may need to support businesses and individuals hurt by global warming.

But a statement published on Monday as part of the settlement said the economy faced “significant risks” from climate change and that it was not yet clear whether this would bite into the value of government bonds.

“Climate change is a systemic risk that presents significant risks and opportunities for Australia’s economy,” says the statement, which was posted on the Treasury website.

“The economic and climatic changes brought about by climate change will have fiscal impacts” which “may affect” the value of sovereign bonds, it says.

While uncertainty about the magnitude and timing of global warming’s “physical impacts” and the energy transition meant it was not yet clear what those consequences on value would be, the statement acknowledged that credit rating agencies were