It was in the mid-1980s that the environmentalist Jay Westerveld coined the term ‘greenwashing’ but it’s only in relatively recent years that concerns around greenwashing and climate litigation more broadly have risen on the agendas of directors and officers as they question how the fast-evolving climate liability risk horizon might impact them.
Lending their insights to Insurance Business, Angus Duncan (pictured left), executive director, global D&O coverage specialist at WTW and Michelle Radcliffe (pictured right), director in WTW’s Insurance Consulting & Technology team, where she specialises in climate and ESG consultancy, addressed the scale of the concern.
Since the UN first started recording climate litigation cases in 2017, cases have doubled, Radcliffe said. Of note, these cases are not all against private companies but include those against governments and other entities.
“One of the challenges with climate litigation is how you go about defining it,” she said. “There is no one definition, so when we talk to insurers who are looking to track climate litigation cases to understand the climate litigation risk across their portfolios, that’s the starting point – what does it involve? People tend to think of the big fossil fuel focused cases that we read about in the papers, but the risk areas are broader than that.
“Yes, there are mitigation cases, but there are also adaptation cases and legal and regulatory cases. Equally, a number of cases may not necessarily look like climate litigation cases, but, when you dig deeper, it is clear that climate is an instrumental factor in the losses claimed. And a number of these climate litigation cases are test cases… If there are findings in favour of the claimants that could open the floodgates for similar types of cases.”
Equally, Radcliffe said, the volume of cases looks set to grow because the number of climate laws and policies are growing incrementally – not just in the UK and Europe, but globally as well. One of the interesting factors behind Europe’s climate regulation evolution is the significant amount of legislation being drafted as part of the ‘European Green Deal’ which is centred on Europe achieving net zero emissions by 2050 – an ambition marked by several significant interim goals.
To achieve such net zero goals at the European level, there needs to be legislation in place that filters down to the individual member states and the companies operating in such jurisdictions to ensure they’re achieving their commitments and targets. In her previous role as a private practice lawyer, this was a key area on which she and her team were advising businesses last year, she said, and so she’s seen first-hand the sheer volume of new legislation that companies need to comply with.
“Once binding legislation is passed, and either applied or implemented in an EU member state, any subsequent breach of that legislation may not necessarily fall neatly within a definition of ‘climate litigation’, but it is ultimately a breach of legislation which is being enacted, so that companies, and hence, countries and hence the EU, can achieve their net zero goals,” she said.
“I refer to it as ‘transitional legislation’ and within that there is proposed legislation spanning all sectors of the EU economy, from the eco-design of products, to the circular economy, to waste and recyclability. This is just one example, but it shows why it’s important to have a good grasp of what is ultimately climate legislation and how broad climate litigation is as a concept.”
Duncan shared some of the top resources where these climate litigation metrics can be tracked, highlighting the website produced by the Sabin Center for Climate Change which tracks climate cases. Meanwhile, the LSE’s Grantham Institute has additional resources looking at laws and policies. There is also a new ‘Climate Policy Radar’ website which provides insight into changing climate legislation.
“These are great resources for finding out figures,” Duncan said. “For instance, as of June, there were more than 2,300 climate cases on Sabin’s Climate Change Litigation Database. That’s a global figure but they also split them into US and cases from the rest of the world, because the US is much better at tracking the types of litigation than pretty much anywhere else in the world.”
Radcliffe noted that it’s interesting to see the increased number of cases occurring outside of the US, which has always had the highest number of cases. The US, the UK, Australia and Germany have traditionally led the charge on climate litigation, she said, but we are now seeing a growth in cases in other countries – with Indonesia alone filing 12 cases.
Duncan and Radcliffe each highlighted some of the key themes they’re seeing in terms of the litigation exposures facing businesses today. A recent paper co-authored by WTW and Martin Lockman (Sabin Center for Climate Change Law) broke down these cases into mitigation claims, adaptation claims, and legal and regulatory claims, Radcliffe said, and there are notable cases within each tranche.
For instance, in the US, cases against fossil fuel companies alleging responsibility for climate harm are increasing. Meanwhile, the UK has seen its first case filed against directors, while in France claims are being brought under the ‘duty of vigilance’ law, which focuses on the extent to which companies are identifying and preventing risks to human rights and the environment which could occur as a result of their business activities. The rise in greenwashing claims is prevalent in a number of jurisdictions.
“It’s interesting to see the ways in which these types of cases are being brought - the use of existing legislation to bring claims, but also how new legislation is now facilitating climate litigation,” she said. “That doesn’t necessarily mean it’s resulting in claimant success, but I think, from a business perspective, the risk simply of being named in these types of cases and the associated costs and reputation risk are a deterrent in their own right.”
There’s a lot happening in the space right now, Duncan said, and, from his perspective, it’s critical to note that a lot of these cases aren’t simply about the money. This alone makes these cases very different to most types of securities class action lawsuits, he said, because they’re about enacting behavioural change and forcing companies to change the way they’re acting and put a different plan in place.
“So many people deal with litigation by settling a claim, insurance gets involved and you just pay out to prevent the costs,” he added. “But some of that isn’t going to work when a claimant is not just looking for a payout in terms of money, when they’re looking for a settlement that includes an agreement to change your business. And that’s a really big change in terms of how litigation works.”
With that in mind, Radcliffe and Duncan emphasised that while this has been agenda-setting litigation, the success of such cases may clear the path for other claimants who are instead looking for a financial settlement.
“The message which I have been giving to insurers for a number of years now is that whilst climate litigation often takes the form of agenda-setting litigation, this is beginning to shift as litigation funders are entering the space with different motivations,” Radcliffe said. “Against the backdrop of the changing regulatory and legislative environment, the climate litigation risk landscape is changing.”
