Law turning its gaze on climate accused

Published date29 January 2022
The smart money is moving away from investments in climate-damaging activities and products, towards firms that offer solutions to the climate emergency. BlackRock chief executive, Larry Fink, emphasises this transition is not attributable to environmental activism per se but to good old-fashioned capitalism: the investment risk is simply too great to do otherwise

Investors are undoubtedly responding to government action — many nations now have climate change policies and legislation that require emissions to be disclosed, priced-in or reduced — but increasingly, the risk of adverse judicial decisions may be playing a part in investment decisions.

There are four trends in climate change litigation worth tracking.

First, multiple successful cases have been brought around the world requiring business transparency from corporates.

Cases have centred on ‘‘greenwashing’’ greenhouse-gas (GHG) activities through misleading advertising, or the failure to disclose material risks to the market. Some corporates back down in the face of litigation, for example, the Commonwealth Bank of Australia and the Australian Retail Employees Superannuation Fund recently agreed to disclose climate change risks to investors, factor them into investment strategies and adopt a net-zero policy. Other companies double-down. Exxon Mobil is currently attempting to argue its First Amendment right of free speech before the Texas Supreme Court to say whatever it likes about climate change. But ‘‘kicking the can down the road’’ will only work for so long.

Second, litigation is proving increasingly successful against corporates for the damage they cause directly to the climate

In the landmark case of Shell v Milieudefensie, last year the Hague District Court found that the emissions-intensive activities of Royal Dutch Shell endangered citizens, violated the duty of care under the Dutch law, and breached human rights obligations such as the right to life contained in the European Convention on Human Rights.

The Court ordered Shell to reduce GHG emissions by 45% from all its activities — that is, from its own emissions and from the use of the oil that it produces — by 2030 compared to 2019, and to net zero by 2050. The reductions applied across the entire Shell group and to its subsidiaries, globally. As a consequence, the Court noted that Shell would be required to forego new investments in extraction and/or limit its production.

The case is being appealed to the higher courts, which may...

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