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Climate change and legal liability

Commonwealth company directors under spotlight over climate change liabilities threat
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A new project spearheaded by Prince Charles, ClientEarth and Oxford’s Smith School of Enterprise and the Environment will expose the Commonwealth’s dirtiest polluters to big-money legal action.

Under the new Commonwealth Climate & Law Initiative (CCLI), company directors and pension fund trustees in Britain, Australia, Canada and South Africa could find themselves in deep water if they contribute to – or mislead the public about – manmade climate change.

Recent developments

The economic risks posed by climate change are unparalleled, and in recent months they’ve led to rising concerns over the legal liability risks for individuals, companies and investors.

In September 2015, Bank of England Governor Mark Carney warned company directors could be held legally liable for failing to manage climate change risks.

In early November 2015, the New York State Attorney General issued subpoenas to Exxon and Peabody Energy, and began investigations over claims they misled the public and investors about the dangers and potential business risks associated with climate change.

‘The days of treating climate change as a fringe concern are over and the potential for climate change litigation against companies or individual directors is growing. They urgently need clarity on their responsibilities, so this initiative is timely.’

James Thornton, CEO of ClientEarth

Legal liabilities

These developments could have significant implications for the insurance sector, but also for other parts of the financial system and companies in carbon-intensive sectors.

Company directors and pension fund trustees could be held liable for i) contributing to anthropogenic climate change, ii) not reasonably managing the risks associated with climate change and/or iii) misleading investors about the business risks of climate change or failing to comply with legal reporting requirements.

‘Company directors could be at risk of litigation if they mislead investors and the public about climate change. They may also face litigation for having contributed to anthropogenic climate change.

‘This is a very new area, but one with potentially significant consequences. This new initiative will help investors to assess the materiality of these potential liabilities and inform best practice across Commonwealth common law countries.’

Ben Caldecott, programme director at University of Oxford’s Smith School of Enterprise and the Environment

The focus countries

Despite only producing 6% of current annual global GHG emissions, Australia, Canada, South Africa and the UK account for 13% of global coal reserves and 11% of global oil reserves.

Their stock exchanges also have 27% of all listed fossil fuel reserves and 36% of listed fossil fuel resources.

Similarities between the laws and legal systems of each of the four countries make the initiative’s work and outcomes easy to transfer.

‘The Initiative addresses a key intersection between climate change and national law. Its findings will support Commonwealth countries in formulating fair, balanced and progressive legal responses to climate change risks and responsibilities.’

Katalaina Sapolu, director, Rule of Law, Commonwealth Secretariat

Click here to find out more about ClientEarth’s work and projects.

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