Home Global warming Analysis: As climate revelations harden, activists seek out laggards

Analysis: As climate revelations harden, activists seek out laggards

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Smog is seen at sunset in this general view of the industrial region of Upper Silesia from Bedzin, near Katowice, Poland, December 5, 2018. REUTERS/Kacper Pempel/

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  • More and more countries are making climate data mandatory
  • Disclosures to shed light on inaction and poor planning
  • Directors in the crosshairs of activists

LONDON, April 7 (Reuters) – Britain’s push to bolster corporate environmental disclosures will shine a light on climate change laggards as activists increasingly turn to the courts to force a faster transition to climate change. a low-carbon economy.

Nearly 2,000 climate change lawsuits have been filed worldwide so far, most in the past seven years, London’s Grantham Research Institute for Climate Change and the Environment has shown.

While the vast majority were against public authorities, a growing number are being filed against companies on grounds that include allegations of failing to exercise due diligence to prevent climate change or misleading consumers about efforts to combat global warming and changes in weather patterns.

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“Vulnerable businesses will be those that contribute significantly to climate change, or fail to manage the risks posed by climate change to their business, or those that present consumers with a green facade that is not backed up by facts,” says Isabella Hervey-Bathurst, co-manager of the Schroder ISF Global Climate Leaders fund.

Britain on Wednesday became the first G20 country to require more than 1,300 companies to disclose climate-related risks and opportunities, according to the global Task Force on Climate-Related Financial Disclosures (TCFD).

Standards and frameworks such as TCFD are designed to encourage businesses to be more transparent as the world strives to limit global warming to 1.5 degrees Celsius above pre-industrial standards by mid-century.

If directors are open about how they manage the ever-changing risks of transitioning to a more climate-friendly future, they are likely to protect themselves against adverse allegations. But those who fail to engage or seek to mislead risk becoming targets of litigation, experts say.

Thomas Tayler, sustainable finance expert at Aviva Investors, said the mandatory disclosure addresses transparency, an area where litigation has focused to date.

“However, it is likely to also lead to other forms of litigation, focusing on inadequate or incomplete disclosures or using information in disclosures made to inform litigation against perceived laggards.”

FULL DISCLOSURE

UN climate scientists warned this week that there is little time left to limit global warming in line with the goals of the 2015 Paris Agreement. Read more

Environmental law charity ClientEarth, which is involved in around 168 active cases, says transparency through frameworks such as TCFD would help – but the quality and extent of company disclosures are crucial.

“Plans need to be clearly disclosed and companies need to be accountable for them, including whether they are truly aligned with Paris,” notes Maria Petzsch, climate lawyer at ClientEarth. “If you don’t, boards and their directors will be exposed to litigation.”

In March, the Securities and Exchange Commission proposed mandatory rules for US companies, while in the European Union thousands of companies are targeted by the bloc’s new corporate sustainability reporting directive.

Globally, minimum sustainability disclosures are subject to consultation, but for most countries disclosures remain voluntary and vary widely in quality and scope. Read more

In an effort to simplify complex risk analysis, experts are urging governments to standardize basics, such as climate models, as major investors warn they are ready to challenge administrators over how they account for risk climatic. Read more

“There is a large amount of uncertainty inherent in climate risk, and therefore in risk reporting,” notes Iggy Bassi, founder and CEO of climate technology company Cervest.

“In the absence of this (standardization) – and in litigious societies – we can expect to see a lot of lawyers jumping into action.”

CLIMATE LIABILITIES

The geographic spread of lawsuits has widened since the first challenges of the 1980s, with courtrooms ranging from Argentina to Japan and Australia grappling with cases.

Among the biggest targets to date are energy companies, responsible for the bulk of man-made emissions through the use of coal, oil and gas, with Shell (SHEL.L), TotalEnergies (TTEF. PA), Enea (ENAE.WA) and RWE (RWEG.DE), all of which have faced litigation in recent years.

As Shell appeals a landmark Dutch court ruling that ordered it to cut its emissions by 45% by 2030, it also faces a daunting challenge: to hold its directors personally accountable for alleged failures in the fight against climate change. Read more

In what a lawyer called a “pivotal moment” for climate change litigation, ClientEarth – also a Shell shareholder – last month announced plans to sue Shell’s 13 directors over alleged failures to pass a strategy truly in line with the Paris Agreement. Read more

Shell said energy supply challenges cannot be resolved through litigation and stresses the need for effective government-led policies.

“Gone are the days when shareholders only skimmed through the ESG portion of corporate reports,” says Elaina Bailes, board member of the London Solicitor Litigation Association.

“It (ESG) is now as crucial as financial performance, and ClientEarth’s argument that Shell’s board has failed to promote the company’s success to its shareholders reflects this trend. “

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Editing by Kirsten Donovan

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