An April 2021 study published by The Geneva Association, a global association of insurance and reinsurance company Chief Executive Officers (CEOs), states that global climate litigation and legislation has grown dramatically in recent years. Among the Association’s key findings:
– Between 1986 and 2020, 1,727 litigation cases were documented worldwide: 1,308 in the U.S. and 419 in other jurisdictions and regional and international courts. More than half of the total recorded cases have been brought since 2015.
– Governments and corporates are being targeted by a wide range of litigants in many jurisdictions, using myriad sources of legal duties… the majority of cases have been brought against governments. However, there is clear evidence that the number of lawsuits against corporate entities (particularly carbon majors) is on the rise.
– Climate change disputes are also within the purview of alternative dispute resolution mechanisms. This includes both mediation and arbitration of commercial disputes and investor-state arbitration (aka investor-state dispute settlement, ISDS).
The report states that “the transition to a net-zero economy … looks set to have the largest impact in the coming years” as the overarching context for the continued rise in litigation. I’ve blogged previously on some of the risks to corporate Net Zero pledges/programs that rely too much on carbon offsets, which pose litigation risks. The Association mentions other possible causes of action:
Loss of value in companies can lead to regulatory sanctions or shareholder action against directors and officers. Already, plaintiffs are taking fiduciaries and decision-makers to court, citing developing standards of care. Complaints have been brought against professionals, such as auditors, for failing to integrate climate change into corporate disclosures. Future litigation may therefore come as a direct consequence of failing to take climate change and the transition seriously enough or into account soon enough…
However, it is important to note that this field will continue to evolve and other drivers of climate litigation may emerge as the world transitions to a net-zero economy. The deployment of green and smart infrastructure systems at scale or of new and untested technologies that disrupt established business models, for example, may drive change in this space if the risks are not adequately assessed, understood and mitigated.
What You Can Do
Increased litigation risk means counsel should be involved in your company’s climate activities every step of the way – from developing public statements/reports to planning how to implement technical program elements. Potential liability and legal actions may differ based on an individual’s role as staff, management or Board member. Increasing internal awareness of these risks, and the need for counsel’s participation, is a good first step. Effective communication requires on-going reinforcement of the message as well.
When exploring these risks internally, it may be helpful to ask “How would we respond if we were faced with climate litigation?” – that moves the conversation away from questioning whether a suit would be filed, and instead opens the door to exploring what controls and protections are in place, or need to be reassessed.
Staying on top of the litigation climate of climate matters will also be important for legal departments and outside counsel. The tentacles of these issues extend widely, sometimes into surprising topics, doctrines and jurisdictions. Lawyers should attempt to gain an understanding of technical foundations of potential climate solutions and statements made by the company.
Perhaps at the most basic level, counsel should assume climate information in all forms will be widely read, since that is now under the microscope by investors, customers, NGOs, the media, and increasingly – regulators.