Climate change litigation: directors’ duties, legal developments and risk management

Abstract

Climate change is being repositioned in commercial, financial and legal spheres as a matter that requires board-level strategic attention. With a broad-ranging consensus that climate change risks are material and reasonably foreseeable, activists are pursuing a myriad of legal challenges seeking to hold government and companies to account. As the law develops, a number of trends are emerging which will require companies and directors to adapt their response to climate-change-related risks. In particular, directors are required to adequately inform themselves as to the broader physical and economic consequences of climate change, to critically evaluate the implications for financial performance and risk management, to adapt their company’s strategic response, and disclose and report relevant information to stakeholders. These requirements need to be managed amid significant uncertainties and complexities about the impacts of climate change, and also as to realistic emissions reduction targets, offsetting, innovation, measurement and reporting methodologies. This paper outlines climate litigation trends to assist in equipping boards, directors and general counsel to understand and engage with their company’s exposure. In particular, we consider claims against government which are of relevance to companies, including challenges to project approvals on climate change grounds; as well as potential actions against companies, directors and advisors in respect of fiduciary duties, disclosures and greenwashing.