New report reveals surge in climate litigation

As the corporate world grapples with a surge in climate-related litigation, investment and stewardship teams must stay vigilant. The increasing number of lawsuits, including those focused on “climate-washing” and “polluter pays” principles, is not just a fleeting trend. According to the sixth annual climate litigation trends report by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, there were almost 50 new climate and greenwashing cases filed against companies in 2023 alone. This signals a marked escalation that could influence investment and corporate governance strategies.

Growing litigation landscape

The recent data indicates a pivotal shift in climate litigation dynamics. Notably, since 2015, over 230 climate-aligned lawsuits have been initiated against companies and trade associations. A significant portion of these, filed since 2020, illustrates a growing accountability trend.

The research highlights a particular increase in “polluter pays” cases, where companies face legal actions for their alleged contributions to climate change through emissions. Currently, more than 30 such cases are under development, reflecting a growing legal focus on corporate environmental responsibility.

Globally, the US hosts the largest number of climate cases, yet only 15% of these target corporations, significantly lower than the global average of 40%. In comparison, the UK, which ranks second, has seen 24 cases, underscoring the geographical variance in climate litigation focus.

Investment teams should be aware that the litigation landscape now spans 55 countries, with new legal grounds explored in nations such as Panama and Portugal last year.

The nature of these cases is evolving. Beyond the traditional corporate framework challenges, we see a rise in cases alleging misleading environmental claims, termed “climate-washing”. The success rate of these claims in court—over 70%—highlights a crucial risk area for corporations misrepresenting their environmental efforts.

Implications for investors and corporate governance

For investment and stewardship teams, the implications of these developments are twofold. Firstly, the financial and reputational risks associated with being the target of climate litigation can affect a company’s valuation and, by extension, investment portfolios. Secondly, the increasing prevalence of such cases necessitates that investors engage more proactively with their portfolio companies to ensure that their climate-related disclosures and practices are both robust and transparent.

Role of SI Engage in navigating climate litigation risks

In this context, SI Engage offers a powerful tool for investment and stewardship teams. Our platform facilitates effective engagement by enabling users to plan, track, and report on activities across their portfolio companies through a centralised dashboard. This capability is crucial in times when timely and informed engagement can be the difference between a company that successfully navigates the complexities of climate regulations and one that fails to adapt.

By using SI Engage, teams can:

  • Monitor the evolving legal landscape and its potential impact on investment portfolios.
  • Engage with companies to advocate for stronger, more transparent climate governance frameworks.
  • Track compliance and improvements in real-time, ensuring that companies are not only aware of but are actively managing their climate-related risks.

As climate litigation continues to grow, both in scope and in the severity of its implications, it is imperative that investment and stewardship teams not only monitor but actively engage with their portfolio companies. The risks associated with climate litigation extend beyond the courtroom; they influence public perception, regulatory responses, and ultimately, financial performance. SI Engage stands ready to support these teams in managing and mitigating these risks, fostering a proactive approach to corporate climate governance that aligns with both investor interests and global climate goals.

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