Climate Litigation & Greenwashing: Emerging Risks for Business

Notwithstanding some jurisdictions’ attempts to pull back from tackling climate change, climate change-related litigation and greenwashing claims are on the rise. As a result, it has never been more important for companies to be aware of how such claims might arise, and the impact of recent case law and regulatory developments on a business’ day-to-day operations.

Historically, climate change litigation and greenwashing claims have been driven by activist-driven litigation to change corporate behaviour. Whilst activist-driven litigation remains a risk to businesses, there is now an increasing and emerging risk of fines, damages and breach of contract claims for greenwashing. Reporting on GHG emissions is a difficult and onerous task – reducing emissions, even more so – and it can be easy for businesses to accidentally expose themselves to such claims, so it is crucial for business to not only be aware of those emerging risks but also to have a clear understanding of how to mitigate them, and to avoid the related potential financial exposure.

In this discussion, a panel of experts will discuss the topic in detail, providing insight and actionable strategies to mitigate or avoid the aforementioned risks. In doing so, the panel will discuss:

• Court decisions in activist-lead claims including, the recent ECHR decision in Duarte Agostinho and Others v. Portugal and 32 Other States, the Court of Appeal decision in Milieudefensie et al. vs. Royal Dutch Shell and the English Court judgment in ClientEarth v Shell plc [2023] EWHC 189. Both those claims were dismissed, but do these decisions signal a changing landscape and a shift in judicial attitudes towards activist-lead actions?
• How damages for climate-related claims are being assessed in courts around the globe, and how the assessment of damages may develop in the English Courts – is there now clear scope for bring a claim for damages arising out of climate-conscious contractual terms including breach of warranties on emissions?
• The potential for claims arising out of Sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA), which amongst other things provides investors in the UK with a right of claim for losses caused by reliance on misstatements or omissions in listing particulars and prospectuses or financial reports. Liability may arise under FSMA for a company if in an individual discharging managerial responsibilities knowingly, recklessly or dishonestly makes an untrue or misleading statement to the market as a whole, such as in a company's financial reports and press releases as opposed misrepresentations made to specific investors. That can theoretically include information on emissions reduction policies or the value of potentially stranded assets.
• An insight from an in-house perspective on managing ESG risk:

• Is the prospect of litigation, fines or reputational risk a serious concern for businesses and their legal team?

• Do directors and employees outside of a company’s legal function understand the risks and commit to implementing environmental strategy?

• How are businesses addressing the need to align the supply chain to reduce Scope 3 emissions?

• The specific issues faced by economic experts when dealing with climate change-related and greenwashing claims, in particular valuation claims.

Despite what some would have people believe, measures to combat climate change are here to stay and cannot be ignored. It is imperative that businesses and their internal and external legal counsel are equipped to address and manage these issues, by proactively assessing current potential risks and exposure, and by reacting to rapid developments in the regulatory landscape. Failing to do so arguably changes the question for a company to “will we face a climate-related or greenwashing claim?”, to “when will we face a climate-related or greenwashing claim?”.

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