Disputes Quick Read: Climate change litigation – what's the latest?

Briefing

In 2020 we wrote about climate change activism by litigation. There have been a number of developments relating to net zero since then, including COP26. So, what's the latest on climate change litigation?

In October 2021 the UK government announced that it will introduce legal requirements for Britain’s largest companies and financial institutions to report on climate-related risks and opportunities.

The announcement came shortly after the publication of the UK's Net Zero Strategy, setting out policies and proposals for decarbonising all sectors of the UK economy to meet our 2050 net zero target. But what impact have these developments had on the UK litigation landscape?

The international movement

Climate change litigation has already emerged globally, with a resurgence in Europe in the last two years in the wake of the 2019 Urgenda decision. While governments still appear to be the primary target, they're not the only ones feeling the heat.

Corporations and financial institutions are increasingly under scrutiny as attention shifts towards financial risks and corporate due diligence. Banks, pension funds, asset managers, insurers and major retailers are now moving into the firing line:

In Milieudefensie, the Dutch Court ruled in May 2021 that Shell had an obligation to reduce its own emissions, along with a 'significant best-efforts obligation' to reduce emissions along its entire value chain, including those of its suppliers and consumers. Some noting that this potentially paves the way for 'value chain litigation' where claimants seek to hold companies responsible for acts and omissions in their value and/or supply chains.
ClientEarth initiated proceedings in April this year for injunctive relief against the Banque Nationale de Belgique (NBB). ClientEarth is alleging that NBB violated EU Treaty provisions, and the Charter of Fundamental Rights, by implementing a new programme which doesn't acknowledge requirements regarding the protection of the environment.

The national landscape

The courts in England and Wales have so far been slow to follow their European counterparts. The Supreme Court's decision to overturn the Court of Appeal's ruling that a third runway at Heathrow was illegal was viewed by many as a signal that our judges aren't willing to apply the same scrutiny to the government's climate policies as other jurisdictions yet.

Activists haven't lost hope though. Following the Heathrow runway case, a wave of climate change litigation has been launched in response to various government initiatives. Targets include a £27 billion road expansion scheme; proposals for a Cumbrian coal mine; and the expansion of North Sea oil and gas exploration by the Oil & Gas Authority (OGA).

Get your business ready

Unlike our European neighbours, UK private entities appear – for now – to be relatively untouched. How long this will last considering precedents being set in other jurisdictions remains to be seen.

The regulatory landscape is also changing. The FCA will be regulating ESG-marketed financial products to prevent greenwashing. Asset managers will also be required to make climate-related disclosures for financial products, with the first reporting phase starting by 30 June 2023. As with other FCA rules, non-compliant institutions will risk fines or sanctions. The changing regulatory landscape will surely expose companies to a greater litigation risk as industry standards and best practices are regularised.

The more national laws and international agreements appearing that mandate a reduction in greenhouse gas emissions, the higher the chance of climate-related litigation being brought. The attitudes of customers are changing, and investors' awareness of climate-related issues is only increasing. Private businesses, not just governments, must be ready.

If you'd like to know more about what this might mean for you, reach out to a member of our Disputes & Investigation team.