An individual member is taking a $50 billion superannuation fund to the Federal Court for failure to disclose its exposure to climate change risk and preventative actions.
Mark McVeigh, a 23-year-old Rest member, is taking the fund to court over claims he is having trouble finding out what is being done to protect his retirement savings.
The basis of McVeigh's argument is the UN's Intergovernmental Panel on Climate Change's predictions that if emissions continue to rise then the average global temperatures could rise two degrees by 2050, which would result in greater natural disasters.
"I would like to know what Rest is doing about climate change and whether my money is being managed properly," McVeigh said.
"As an individual it can be difficult to make a big impact on limiting climate change. Rest is a $50 billion fund. It has a lot of power and influence and it should do the right thing."
At this stage, Rest has not committed to the UN's Principles for Responsible Investment, nor is it a member of the Investor Group on Climate Change or the Responsible Investment Association of Australasia.
Rainmaker data estimates that as at June 2017, UN PRI signatories in Australia represented about half of all super funds under management, with the largest super fund signatories being BT Financial Group, AustralianSuper and Colonial First State.
In a statement, Rest said it is unable to comment on ongoing legal matters but that it requires all of its investment managers to consider ESG risks when investing in order to deliver competitive long-term returns for members. This includes climate change, the fund said.
"Before appointing an investment manager, we conduct extensive due diligence to assess their ability to invest sustainably and meet set investment objectives," Rest said.
"We require our investment managers to consider a range of factors, including ESG risks, when selecting investments in their portfolios and when exercising voting rights."
Despite this, Environmental Justice Australia principal lawyer David Barnden said Rest has long-term investments in property and infrastructure and public companies exposed to climate risks.
This Federal Court action will serve as an important test case for Australia's superannuation industry, given super funds own about 25% of the total value of ASX-listed companies, he added.
"Super trustees must consider climate risks and protect their members from the significant impacts of climate change...These funds and the individuals that control them are critical to the economy's fast and orderly transition under the Paris Agreement," Barnden said.
On its website, Rest states that prudent investing involves looking at all the factors that determine the sustainability of an investment, which involves considering ESG risks in a balanced manner with other investment risks.
"Therefore, we do not include or exclude an investment solely on a single risk or issue in isolation but seek to balance each risk against the probable benefit of holding an investment," Rest states.