Climate change litigation – the heat is on

The battle against climate change is increasingly being fought in the courtroom, with the number of climate litigation cases globally almost doubling over the past three years, in an attempt to drive – or, in some cases, delay – effective action on climate change.

According to a recent report by the United Nations Environment Programme (UNEP) in cooperation with the Sabin Center for Climate Change Law, more than 1,550 cases* had been filed in 38 countries as of 1 July 2020, up from 884 cases in 24 countries in 2017. While the overwhelming majority of these cases have been brought in the US, the UK ranks third after Australia in terms of the number of climate litigation cases filed (63 at the time of writing).

With countries around the world increasingly articulating policy objectives to address climate change impacts and setting national emissions reduction targets in line with the Paris Agreement, a diverse group of claimants are turning to the courts to compel governments and businesses to implement their climate commitments; pursue more ambitious climate change mitigation and adaptation goals; and obtain compensation for climate harms.

As climate litigation rises in frequency and number, the body of legal precedent is growing and forming an ever more coherent field of law. The profile and pressure created by litigation – whether it ultimately succeeds or fails – may influence policy, regulation and corporate behaviour, as well as encouraging similar lawsuits.

Claimants are increasingly deploying novel, bold and creative legal arguments, supported by advances in climate attribution science and greater awareness of the financial risks of climate change – including using human rights-based arguments in cases that seek to advance climate policies, drive strategic change, and raise public awareness.

In the most high-profile human rights-based case to date, Urgenda Foundation v. State of the Netherlands, a Dutch environmental NGO and 900 Dutch citizens sued the government in 2015 to require it to take more ambitious climate action in line with its human rights obligations. In December 2019, the Supreme Court of the Netherlands upheld the lower courts’ order requiring the Dutch government to reduce Dutch emissions by a minimum of 25% by 2020 compared to 1990 levels. It is the first time a government has been compelled by law to take action on climate change.

And now, in a similarly ground-breaking case led by the lawyer behind the Urgenda case, Friends of the Earth Netherlands (Milieudefensie) hopes to force Shell to reduce its CO2 emissions by 45% by 2030 compared to 2019 levels. Backed by more than 17,000 Dutch claimants and six other organisations, the case was heard in The Hague in December, with the eagerly anticipated judgment due in May.

Meanwhile, in Australia a group of teenagers have launched a class action lawsuit to challenge the environment minister’s approval of a New South Wales coal mine, which they claim violates her duty of care to future generations. The landmark case, which was heard in the Federal Court yesterday, could have dramatic implications for the country’s future energy policy.

Other climate litigation trends include:
• using various strategies in lawsuits against the major fossil fuel companies – ranging from nuisance claims, planning and permitting cases, disclosure-related and fraud cases – including class actions that seek to exploit the wealth of precedent from US tobacco, asbestos and other mass tort claims;
• advocating for greater climate disclosures and an end to greenwashing, i.e. making false or misleading claims about the environmental credentials of a company’s products or the company itself;
• a rise in the number of claims alleging insufficient disclosure or breach of duty by directors, pension fund trustees, auditors, etc in relation to under-reporting or alleged insufficient consideration of climate risk;
• international investors’ use of the investor-state dispute settlement (ISDS) system to bring legal action against host governments to claim damages for costs imposed by domestic climate change regulation.

Although climate change litigation is still in its relative infancy in the UK, we have seen a number of precedent-setting cases over the past couple of years.

In one of the most prominent examples, environmental campaigners Friends of the Earth and Plan B challenged the Secretary of State’s decision to designate a third runway at Heathrow on a number of climate change-related grounds. While the Court of Appeal (CoA) ruled that the Government’s plans to expand Heathrow Airport were unlawful because they failed to take account of the Paris Agreement, in December 2020, the Supreme Court overturned the CoA’s judgment following an appeal by Heathrow Airport. Plan B now intends to take the case to the European Court of Human Rights.

Separately, Plan B has served a pre-action letter on the UK government, alleging that its failure to develop a plan to tackle climate change represents a violation of human rights and of both domestic and international law.

In another landmark case, Client Earth, an environmental law charity, filed a greenwashing complaint against BP in December 2019, alleging that BP’s global ‘Possibilities Everywhere’ advertising campaign misled the public by focusing on the company’s low carbon energy products, when more than 96% of its annual spend is on oil and gas, and as such violated the OECD’s Guidelines for Multinational Enterprises. As a result, BP withdrew the campaign and committed to redirecting its advertising resources towards advocating for progressive climate policies.

While the majority of cases involve claims against the government and carbon majors, no business is immune from the threat of climate litigation – and the reputational challenges this may bring. Even if a company’s defence stands up legally, it should take into account the likely reputational impact of its arguments under public scrutiny when considering the most appropriate course of action.

Pension funds and asset managers in particular are feeling the heat from climate risk disclosure and investment-related lawsuits. More cases of climate litigation affecting the financial sector were filed in 2018 than in any previous year, according to a 2019 study. This upward trend is likely to continue with more cases brought against investment funds in relation to the need to diversify their investment portfolios to ensure exposure to climate change risk is minimised and to disclose the climate change risk inherent in their investments.

In fact, many of the world’s largest asset managers are already taking pre-emptive action and pushing companies to slash emissions, including BlackRock CEO Larry Fink in his most recent annual letter to business leaders and, in the UK, Aviva Investors, which has threatened to divest fully from 30 oil, gas and mining companies unless they set net zero emission goals and integrate climate risks into their strategy.

A growing source of climate-based litigation is likely to be activist investors, who use their shareholdings to overcome problems of legal standing. Whether claims relate to financial disclosure or directors’ duties, shareholder litigation does not face the same justiciability and causation hurdles that still beset tort-based claims.

As financial disclosure requirements related to climate risk increase – with the UK set to become the first country in the world to make Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures fully mandatory across the economy by 2025 – so too does the likelihood that regulators, consumers, and investors will take action where those disclosures are misleading or incomplete.

According to a ClientEarth report published last month, the overwhelming majority of the UK’s top listed companies are failing to meaningfully disclose climate-related risks, impacts and financial implications. Given that many companies are increasingly making public net zero commitments, this failure not only highlights possible greenwashing, but could also put some firms in breach of existing UK laws; as such, directors could be at risk of personal litigation as climate considerations begin to form a recognised part of their existing legal obligations and duties.

Fraud and greenwashing lawsuits are also being brought against companies outside the energy sector. Since 2015, for instance, Volkswagen has faced multiple class actions, most recently in the UK, over the “Dieselgate” scandal involving its greenwashing of the true extent of vehicle emissions. Mercedes is similarly facing imminent group litigation action in the UK over allegations of dirty diesel emissions fraud, following a successful US class action lawsuit.

The UK has a legally binding commitment to transition to net zero emissions by 2050. With the UK hosting COP26 in November and the G7 Summit in June, at which the Prime Minister has pledged “to build back better from coronavirus and create a greener, more prosperous future,” government and corporate failure to tackle climate change will be under the spotlight in this country more than ever this year.

Indeed, only last week Robert Jenrick, the Secretary of State for Housing, Communities and Local Government, was sent a letter before action by a Cumbrian climate change campaign group, giving notice of its intention to seek a judicial review of his decision not to call in plans for a new deep coalmine in the county – despite the Climate Change Committee warning that the mine would increase global emissions, compromise the UK’s legally binding carbon budgets and give a “negative impression of the UK’s climate priorities in the year of COP26”.

Businesses – whichever sector they operate in – must be alert to the evolving climate change litigation landscape, especially the innovative strategies that are helping to drive the global surge in claims and set new precedents. It is imperative that companies and their directors fully understand, and take steps to mitigate, the risk of litigation – as well as the potential financial and reputational repercussions. The heat is on: climate change is a threat that no one can afford to ignore.

*The UNEP report defines climate change litigation as “cases that raise material issues of law or fact relating to climate change mitigation, adaptation, or the science of climate change”, which are brought before a range of administrative, judicial, and other adjudicatory bodies.

by Sarah Peters 3.3.21

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