A new wave of climate change litigation is targeting companies. Brought by investors, shareholders, cities and states, these lawsuits assert various grounds, including nuisance, failure to warn, violation of human rights and negligence. Some claims also allege inadequate financial reporting of climate change-related risks.
Given these trends, businesses across sectors must mitigate the risk of climate change litigation. They can start by taking the following steps:
Highlight the importance
Effective company strategy and policy is required to address climate change litigation risks. Employees, especially directors, must be educated about the climate change-related issues affecting the business. Shareholders will hold decision makers accountable, requiring them to defend their management decisions.
Disclose climate change-related risks
While companies are not legally required to disclose climate change-related risks in their financial reporting, those companies that do not are in danger of lost investment and value, and possible legal action.
Companies face frequent claims that their public communication and information regarding climate change are inadequate. To help mitigate their risks, they must be transparent and proactive in managing them.
Keep current on climate change legislation
In response to growing public pressure and increased litigation, legislators are codifying their policy commitments on climate change. Businesses can mitigate the risk of legal action simply by keeping abreast of these legislative and policy changes to ensure they are in compliance.
Diversify and innovate
To date, most lawsuits have targeted oil & gas companies. Diversification offers one key way for these companies to mitigate their exposure, and it is clearly underway. Since 2000, investors have directed more than US$15 billion toward non-hydrocarbon technologies worldwide.
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