Climate change risk and liability report 2022: An intensifying spotlight on reporting, governance and good practice

In this report we look at the key issues, from recent and emerging developments in this area, to how organisations can best position themselves to withstand shocks and seize opportunities so that they can help to deliver a future that is sustainable for themselves, and for all of us.

Download the full report here

Climate risk and the liability landscape continue to evolve at a rapid pace. A raft of new climate-related legal claims are constantly being filed, and novel arguments are still being advanced. With the countdown to net zero carbon emissions fully underway and regulation tightening, there are profound implications for all industries. The onus on boardrooms to manage the risks and respond to the opportunities presented by climate change is stronger than ever.

A year on from COP26, we can now clearly see that the pledges made in Glasgow and the scientific certainty about the consequences of late action have shaped the climate litigation landscape to a significant extent. Governments are increasingly being held to account if their actions are deemed to not live up to their promises. An unprecedented number of new lawsuits have also been filed against corporate actors on various grounds, including greenwashing, and a failure to mitigate and adapt to climate change in line with the Paris Agreement goals. Growing numbers of people, young and old, are adding their voices to calls to tackle climate change faster.

More and more companies across all sectors are coming to realise that beyond the damage caused to the planet, climate change could pose a threat to their business models. Increasingly, they recognise the need to be ahead of the curve, to avoid a disorderly transition to a low carbon economy, and face up to social, economic, legal and regulatory demands. It is a lot to think about at a time when many other major issues, notably, the immediate impacts of the energy crisis and the recovery from the COVID-19 pandemic, are also clamouring for attention on the boardroom agenda.

Despite the challenges, a pathway to progress remains essential. It is hoped that this year’s COP27 climate change summit in Sharm El Sheikh, Egypt, will re-invigorate the pace in terms of defining and strengthening policy on decarbonisation, and devoting more attention to the pressing issue of climate adaptation, as well as loss and damage. Achieving net zero while adapting to the already inevitable consequences of climate change will require significant investment as well as regulation, and this could create major opportunities for businesses, as well as risks.

As companies build resilience, the importance of a holistic climate risk assessment, including climate liability risk, cannot be overstated. At the same time, putting climate risk awareness at the heart of corporate governance and decision-making is an essential risk management tool for all boards.

Since legal considerations extend beyond environmental law and regulation to areas like asset management, finance, insurance, tax and many more, businesses are looking to their lawyers for deep knowledge of the key issues and out-of-the-box thinking to guide them through the transition.

The global energy crisis and market tumult driven by Russia’s invasion of Ukraine have altered the climate agenda, causing short-term stagnation – and a reversal in some cases – of progress towards climate goals. But, like the recent COVID-19 pandemic, the impact of this latest crisis is neither permanent nor linear. While there is no definitive answer to the question of whether the energy crisis will help or hinder long-term global decarbonisation, our view is that it will do both – in different forms, in different places, at different times – but that, ultimately, the climate agenda will prevail