A major part of delivering a successful sustainability program is planning for evolving climate risks. Climate change is driving severe weather, which manifests as physical risks. Neglecting changing weather patterns and risks they pose to business can impact companies not only in the initial climate event but also in legal risks that follow those events. A recent ArentFox memo breaks down several examples from recent history:
- “In 2024, after an Oregon jury found PacifiCorp liable for failing to de-energize lines during the 2020 Labor Day Fires, the company reached a $178 million settlement with over 400 plaintiffs.
- Hawai‘i Electric faces wrongful-death and property-damage suits following the Lahaina blaze.
- Louisiana utilities confront consolidated negligence actions alleging that downed lines worsened Hurricane Ida’s destruction.
- Facilities in floodplains have endured litigation related to workers being injured by floodwaters in hurricanes.”
The memo emphasizes the importance of moving from a compliance and reporting to a resilience mindset and gives five steps for doing so:
- “Embed forward-looking climate data — not historical averages — into every capital-expenditure decision.
- Treat vegetation management, floodproofing, and backup-power investments as core safety programs, and document board-level deliberations.
- Evaluate whether mission-critical suppliers have appropriate resilience plans so that key business inputs will remain available.
- Stress-test emergency-response plans under multiple extreme-weather scenarios and preserve records showing continuous improvement.
- Align public disclosures with funded mitigation measures. Misalignment can be portrayed as an admission.”
Resilience and physical risk management are no longer just about preventing disruption to business operations. It is also about managing legal risks that stem from these events.
Our members can learn more about risk management practices here.
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